Here’s how you can bring down your home loan EMI
Okay, so you’ve successfully availed a home loan and you’re on the way to achieving your goal of…Read More
People taking home loans can avail various tax benefits under sections 24, 80C and 80 EE of the Income Tax Act 1961. Saving on multiple tax benefits on a home loan for all income profile helps in reducing the total outgo of the tax. The tax benefits on home loan can be availed both on the principal repayment and the interest.
Below is a detailed description of the tax benefits one can avail on home loans:
Under Section 24 of the Income Tax Act, the interest being paid in monthly EMIs on the home loan for a self-occupied property can be claimed as a tax deduction from the total income up to a maximum of Rs. 2 lakhs. The deduction under this section is only applicable on a property for which the construction gets completed within 5 years.
Under Section 24, if the property has been brought before the completion of construction or is a new purchase, deductions of the interest being paid can be claimed in 5 equal installments up to a maximum amount of Rs. 2 lakhs. The deductions can be claimed from the year of purchase or when the construction is completed. When the home loan has been taken for renovation purposes, the tax exemption can be claimed after the renovation gets completed.
Section 80 C of the Income Tax Act allows one to avail tax benefits on the principal amount of the home loan with a maximum investment of Rs. 1, 50,000. In order to claim this deduction, the property should not be sold within 5 years of possession otherwise the benefits will get reversed.
The type of the property can be either self-occupied or a let-out property. The exemption under Section 80C is only applicable when the construction of the property is done. Certain stamp duty charges and registration charges can also be claimed under this.
Under Section 80 EE, first time home buyers can claim an additional deduction up to Rs. 50,000. The deduction under this section is over the Rs. 2 lakh limit. The value of the property should be less than Rs. 50 lakhs and the loan value should be more than 35 lakhs in order to claim benefits under this Section.
Under Sec80EEA, if you are a first time home buyer, you can claim an additional deduction of Rs. 1.5 lakhs. The price of the property should be below Rs. 45 lakhs to claim the benefits.
In case of a joint home loan, an immediate family member can become a co-applicant. The two applicants can avail of higher tax benefits under different sections explained below:
Earlier, if an owner had two properties, then the second property was considered to be a let-out property. In budget 2019, the benefit of tax deduction was extended to two self-owned properties and the notional rental income (which was earlier taxable) got exempted from the income tax. Property buyers who purchase a second property are eligible to a benefit on the interest repayment under Section 24 up to a maximum amount of Rs. 2 lakhs.
HRA (House Rent Allowance) is deductible from the total income of salaried individuals who are living in a rented accommodation under the Sec 10 (13A). This benefit cannot be claimed by self-employed professionals.
The tax benefits can either be claimed by using the home loan certificate or by filing the IT returns. To claim the tax benefits, one has to submit the following important documents:
If you are still wondering whether you are eligible for a home loan, go check your eligibility with the home loan eligibility calculator and get your house financed now from a housing loan company. On taking a home loan, in addition to getting the house financed, borrowers are eligible for various tax benefits which help in saving on the principal and interest amount as explained above.