It’s safe to say that money saved is money earned. The good news is that you can save quite a substantial amount of money while fulfilling your dream of becoming a homeowner. When applying for a home loan, it’s essential to familiarize yourself with the associated tax benefits to maximize your savings. Under the Income Tax Act of 1961, the Indian government provides a range of home loan tax benefits, which may be claimed during each year of repayment. Section 80C provides a tax deduction for principal repayment, Section 24(b) provides a tax deduction for interest, and Section 80EE provides an additional home loan interest tax exemption for first-time homebuyers. These home loan tax advantages enable borrowers to save a significant amount of money every year.
Here is a detailed synopsis of what home loan tax benefits have in store for you
Home Loan Tax Benefits on Interest Paid Under Section 24(b)
This section allows you to claim a tax deduction of up to Rs.2 lakh on the interest paid on a self-occupied home. This is valid even if you are not occupying the house and are residing elsewhere. However, if you have rented the property then there is no maximum limit on the deduction.
Home Loan Tax Benefits on The Home Loan Principal Repayment Under Section 80C
The loan principal you repay is permitted as a deduction of up to Rs.1.5 lakh under this section. Keep in mind that the deduction is applicable only if the construction of the house is completed with a valid completion certificate and the property is not transferred or sold to someone else for up to 5 years from the time the construction is completed.
Section 80EEA: Home Loan Tax Benefits for First-Time Buyers
A new deduction under Section 80EEA had been proposed in the 2019 budget. According to this, interest paid on a housing loan taken between April 1, 2019 and March 31, 2020 is deductible beginning in the assessment fiscal year 2020–2021 up to Rs.1.5 lakh. You can claim the interest deduction under Section 80EEA, which is in addition to the Rs.2 lakh deduction permitted under Section 24 and the Rs.1.5 lakh deduction allowed under Section 80C.
Section 80EE: Additional Home Loan Tax Benefits for First-time Homebuyers
Section 80EE ensures that as a first-time buyer, you can claim an additional tax benefit of Rs.50,000 on your interest payment. This comes as a welcome way to save more, helping you utilise funds for other goals, be it related to home improvement or other goals. Housing loans, also known as home loans, offer various tax benefits that can significantly reduce the overall cost of homeownership. However, the important information to keep in mind is that this is applicable only if the property is valued at Rs.50 lakh or less and the loan amount applied for is Rs.35 lakh or less.
Home Loan Tax Benefits on Second Home Loan
Tax deductions are available on your second home financed with a home loan, too. However, this is valid only on the interest paid.
Joint Home Loan Tax Benefits
Applying for a home loan jointly with a family member improves your loan eligibility as well as your tax benefits. In short, both you and the co-applicant can receive home loan tax benefits of up to Rs.1.5 lakh to Rs.2 lakh on the principal and interest payment, respectively. Do ensure that your name is mentioned as the co-owner and co-applicant to avail of this benefit.
You can claim the tax deduction by simply providing the home loan interest certificate to your employer as a salaried applicant. Utilize the home loan tax benefits to boost your returns and reduce your tax burden. Mind you, your tax will be deducted if you have not furnished this certificate. As a self-employed borrower, you need not produce this certificate, however, do keep it handy for future reference.
Easiest way to calculate your housing loan tax benefits on a home loan is by using an online home loan calculator. For that simply enter your home loan details and then click on calculate and a detailed tabulation will pop up. This makes your lengthy process easy in a few simple steps.
You may claim deductions in your income tax against principal and interest payments that you make towards repayment of your home loans and it can give you Home Loan Tax Benefit.
In a given financial year, you can save up to 1.5 lakh for principal repayment and up to Rs.2 lakh for interest on a home loan. That’s a lot of money which can be set aside as savings or for achieving other life goals, be it buying a car or going on a holiday. Keep in mind, a home loan has a lengthy tenor, which assures a lot of savings when tax planning is done correctly.
You can achieve maximum savings by being on the lookout for competitive rates when taking a home loan. It comes with a competitive home loan interest rate and offers quick approval and fast disbursal of funds along with high-value financing and the option of a top-up loan. Many banks and NBFC’s provide home loans at affordable interest rates, so to avail Home loan tax benefit, apply online and get started!