People can avail various tax benefits who are taking home loans under sections 24, 80C and 80EE, of the Income Tax Act, 1961. One can save a lot from multiple tax benefits on a home loan for all income profile, and it also helps in reduction of the total outgo of the tax. For both, principal repayment, and the interest, home loan tax benefit can get availed.
Let’s dive deep into the tax benefits one can have on the home loan:
Deduction on the interest paid for the home loans.
According to Section 24 of the Income Tax Act, a tax deduction of up to Rs. 2 lakhs can be made from total income for interest paid in monthly EMIs on a house loan for a self-occupied property. Only properties for which the construction work is finished within 5 years are eligible for the reduction described in this section.
Deductions for interest paid on new purchases or during the pre-construction phase of a project.
If the property was purchased recently or before construction was finished, Section 24 allows for deductions of interest paid up to a maximum of Rs. 2 lakhs in 5 equal instalments. After the construction is finished or in the same year as the purchase, deductions may be made. After the remodelling is finished, the tax exemption can be claimed when a home loan was taken for renovation purposes.
Deduction for principal on a home loan
With a maximum investment of Rs. 1,50,000, one can take advantage of tax savings on the principal amount of a house loan under Section 80 C of the Income Tax Act. The property must not be sold within five years of occupancy to qualify for this deduction; otherwise, the advantages would be forfeited.
It may be a self-occupied home or a rental property. Only after the property’s construction is complete may the exemption under Section 80C be used. Under this, certain registration and stamp duty fees may also be claimed.
What deductions fall under Sec 80EE and 80EEA.
A house buyer may now use section 80 EE to deduct an additional amount of up to Rs. 50,000. The maximum deduction allowed under this provision exceeds Rs. 2 lakhs. To be eligible for benefits under this Section, the value of the property must be less than Rs. 50 lakhs and the value of the loan must be greater than Rs. 35 lakhs.
Under Section 80EEA, you are eligible for an additional deduction of Rs. 1.5 lakhs if you are a first-time home buyer. To qualify for the benefits, the property’s price must be less than Rs. 45 lakhs.
What deductions will be avail on a joint home loan?
An immediate family member can become a co-applicant if it is the case of a joint home loan. Two applicants can get privileged by getting benefitted from higher tax under separate provisions that is explained below:
Tax Breaks for Second Property
If the homeowner has two homes, their second home likely served as a rental property in the past. However, the tax deduction benefit has been extended to the two self-owned properties as of the 2019 budget, and the speculative rental income (which was previously taxable) has been exempted from income tax. According to Section 24, buyers of second properties are eligible to receive benefits on interest repayment up to a maximum of Rs. 2 lakhs.
HRA Tax Advantages
The Home Rent Allowance of a salaried individual who rents an apartment is deducted from their gross income under Section (13A). A self-employed individual, such as one involved in business, is never eligible to file for HRA.
By submitting IT returns or using house loan certificates, you can make a tax claim.
To claim tax benefits, you must submit the following documentation, for example:
- Information regarding the home’s ownership
- Local document certificate
- Document proving the taxpayer’s identity and the amount of municipal taxes paid over the course of the tenure while the house was being built.
If you are still wandering with the curiosity to know about your eligibility for getting home loan, then make usage of home loan eligibility calculator and go get your house financed. In addition, getting your house financed, you are eligible for getting tax benefits. It will help you in making saving on the interest and principal amount as explained above.