Is home renovation loan tax-free?

Contrary to popular perception, there are tax benefits available on home renovation loans in India. The interest paid on a home renovation loan is eligible for tax deduction under Section 24(b) of the Income Tax Act.

This allows you to lower your taxable income by the amount of interest repaid every year. So, by taking out a renovation loan, you can revamp your home and save tax to some extent. Do keep in mind that the principal repaid does not qualify for tax rebate under Section 80C.

In addition to income tax benefits, homeowners can also avail of GST benefits on home renovation loans in India. Under the Input Tax Credit (ITC) system, the GST paid on raw materials, labour charges, contractor fees, and other services related to the renovation can be claimed as input credit. This Input Tax Credit can be adjusted against the overall GST liability on the renovation services."