Here’s How A Home Loan Transfer Can Maximise Tax Benefits

When it comes to tax planning, exploring various avenues for saving money is crucial. The possible tax advantages linked to house loans are one issue that is frequently disregarded. 

In this guide, we will discuss the idea of house loan transfer and how it may be a useful tactic for maximising your tax advantages in this post.

Let’s dive in!

Understanding Home Loan Transfer

A home loan transfer, also known as refinancing, involves shifting your existing home loan from one lender to another. Many borrowers opt for home loan transfers to take advantage of better interest rates, improved customer service, or enhanced loan features. However, apart from these benefits, a home loan transfer can also offer significant tax advantages.

Tax Saving on Home Loans

Home loans offer several tax benefits that can significantly reduce your tax liability. One of the major tax advantages is the 80ee deduction available on the interest paid towards your home loan. Under Section 24(b) of the Income Tax Act, you can claim deductions on the interest component of your home loan. The maximum deduction allowed is up to ₹ two lahks per year, provided the property is self-occupied. This deduction can help lower your taxable income and ultimately reduce your tax burden.

Additionally, there are tax benefits available on the principal repayment of your home loan. Under Section 80C of the Income Tax Act, you can claim deductions on the principal repayment of your home loan up to a maximum of ₹1.5 lahks per year. This deduction is part of the overall limit of ₹1.5 lahks available under Section 80C, which includes other investments such as life insurance premiums, provident fund contributions, and more.

Furthermore, if you have taken a joint home loan with a co-borrower, both individuals can individually claim tax benefits on the interest and principal repayments. This allows for higher tax deductions and can be advantageous for couples or family members who are co-owners of the property.

How Home Loan Transfer Can Enhance Your Tax Benefits

By transferring your home loan to another lender, you can potentially increase your tax benefits in the following ways:-

Lower Interest Rates

If the new lender offers a lower interest rate than your current one, it can reduce the interest component of your home loan. This, in turn, means higher deductions on your tax liability.

Extended Loan Tenure

In some cases, a home loan transfer may allow you to extend the tenure of your loan. This can help in lowering your Equated Monthly Installments (EMIs), freeing up more funds for other purposes while maintaining or even increasing your tax benefits.

Additional Loan Components

Some lenders provide the option of taking a top-up loan along with the home loan transfer. This additional loan can be used for various purposes like home renovations or purchasing furniture. The interest paid on such top-up loans is also eligible for tax deductions, further enhancing your tax benefits.

Key Considerations for Home Loan Transfer

Below are some key considerations you need to check when applying for a home loan transfer.

Eligibility Criteria

Before opting for a home loan transfer, ensure that you meet the eligibility criteria set by the new lender. Factors such as credit score, income stability, and property valuation may impact your eligibility for the transfer.

Costs and Charges

Consider the costs and charges associated with the home loan transfer. These may include processing fees, legal fees, stamp duty, and other charges. Evaluate whether the potential savings outweigh the transfer costs.

Prepayment Penalties

Check if your existing lender imposes any prepayment penalties for transferring the loan on the equitable mortgage. Calculate whether the savings from the transfer outweigh the penalties, if applicable.

New Loan Terms

Understand the terms and conditions of the new loan, including the interest rate, tenure, and other charges. Ensure that the new terms are favourable and align with your financial goals.


If you have an existing home loan, considering a transfer to another lender can allow you to save more on your taxes. By availing of lower interest rates, extending the loan tenure, or accessing additional loan components, you can maximise your tax benefits effectively. 

However, it is vital to weigh the costs and the remaining tenure of your loan before making a decision. Consult with a financial advisor to determine if a home loan transfer is your right strategy. Start planning today and make the most of your tax benefits while ensuring financial stability for the future.


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