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Income Tax Benefits on Home Loan

Do you know availing a home loan can actually help you save tax?

Well, we all know, that buying a house is not a small task. It takes many days, plenty of hours and most importantly heavy amount to buy a home. So, it becomes important for oneself to be careful and prefer to consult a professional before making the final decision. As a professional with his qualification can help you plan your taxes at the time of buying your house and can guide you properly in the process.

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Indian Government has always put a step forward to encourage citizens to invest in houses and that is the prime reason why many schemes have been launched like Pradhan Mantri Jan Dhan Yojana and Pradhan Mantri Awas Yojana.

With so many schemes launched by the government, one must obviously avail the tax benefits while buying a home as it can help you save a lot of your money. Our government is concerned for us and for our home, we must avail the benefits provided. A home loan comprises of both principal repayment and interest payment.

To avail of Income-tax benefits on home loan, the only essential requirement is that the home loan must be taken for the purchase/construction of a house and where the construction of the home is in the process then, it must be completed within five years from the end of the financial year in which loan was taken.

The maximum amount of benefit which can be availed as a deduction is as follows: –

SECTION 80C: Tax Benefit on Home Loan (Principal Amount)
 As per Section 80C, Rs. 1,50,000 per annum is the deduction allowed. It deals with the principal amount deduction for both self-occupied and let out properties. One must note that the property should not be sold until the expiry of 5 years from purchase and the stamp duty should be paid.

SECTION 80EE: Income Tax Deduction for Interest on Home Loan
As per Section 80EE, the allowed deduction is Rs. 50,000. The benefit provided under the section can be availed over and above the existing exemption of Rs. 2 Lakh. To claim this deduction, one must note that the amount of loan taken should be less than Rs. 35 Lakh or less, and the property’s value should not exceed Rs. 50 Lakh. And the loan must be sanctioned between 1st April 2016 to 31st March 2017. Only the first-time homeowners shall be allowed to claim this deduction.

SECTION 80EEA: Income Tax Benefit on Interest on Home Loan (First Time Buyers)
As per Section 80EEA, the deduction allowed is 1,50,00. The deduction can be availed only when the property’s stamp value is up to Rs. 45 Lakh. For promoting the housing sector, Budget 2019 has introduced deduction under Section 80EEA for homebuyers for a maximum of up to Rs. 1,50,000. However, if an individual is claiming deduction under section 80EE, then he or she shall not be allowed to claim deduction under Section 80EE

SECTION 24: Income Tax Benefit on Interest on Loan for Purchase/ Construction of Real Estate
In case of self-occupied property (SOP), the deduction allowed is up to Rs. 2 Lakh. However, in that case the construction of the house property must be completed within 5 years itself.In case the self-occupied property is getting renewed or repaired then, the maximum deduction allowed is up to Rs. 30, 000.Where the property is let out or deemed to be let out then, the deduction allowed shall be of Rs. 2 Lakh that is the actual interest amount.

As per Section 24, the allowed deduction is Rs. 2,00,000 per annum. Tax Benefit payment of home loan interest along with Processing fee or any kind of charges taken by bank to render its services are tax-deductible is allowed as deduction under Section 24 of the Income Tax Act.

Not only this but for buying joint home loan also,

  • As per Section 80C, each loan holder can claim a deduction for home loan interest up to Rs. 2 Lakh. For claiming this deduction, they should be co-owners of the property taken on loan.

Moreover, tax benefit is also provided on second home loan. You can claim the benefit however; the aggregate amount of deduction is subject to amount limitation. The Government, under the Union Budget has provided more additional benefits for investing in house property.  In previous time, only one property was considered as self-occupied and the second property was deemed to be let out and therefore, notional rent was calculated and taxed as income. However, as per the present updation, now even the second property cab be considered as a self-occupied property.

Opting for the benefits provided by the government can actually allow you to reduce the financial burden and help to maximize your tax savings.

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