How Can Having A Home Loan Save You Income Tax?Savings & Loan AssociationsUpdated on May 27, 2019 View more like this | Visit India, UN | Contact Naina Kapoor |
Home loans not only help you make your housing dreams come true, but also give you a range of tax sops through India’s Income Tax Act framed in 1961. These home loan tax benefit come via Sections 24, 80C and 80EE and apply to both the principal and interest components of your home loan.
Learn about these 5 ways in which a home loan can help you save on income tax payments.
Section 24’s Interest Deductions
This Section gives you deductions from your total income of up to Rs.2 lakh per financial year. These deductions are specific to the interest you incur and pay towards your home loan. The Rs.2 lakh cap applies to self-occupied properties. In case you have given the property on rent, there isn’t any limit on the interest deduction you can claim. To obtain the full range of benefits under Section 24, your property must be constructed within 5 years from the end of the financial year in which you took the loan.
Section 80C’s Principal Deductions
This Section gives you principal deductions of up to Rs.1.5 lakh per financial year. This applies to both self-occupied or let-out properties. However, in order to make a proper claim, you should not sell your property during the first 5 years of possessing it. If you do so, your claimed deductions will be overturned and added to your income for the year in which you sell the property. Apart from principal deductions, this Section also allows you to claim expenses like registration fees and the stamp duty on a home loan up to Rs.1.5 lakh in the year in which you incur them.
Section 24’s Interest Deductions
This Section gives you deductions from your total income of up to Rs.2 lakh per financial year. These deductions are specific to the interest you incur and pay towards your home loan. The Rs.2 lakh cap applies to self-occupied properties. In case you have given the property on rent, there isn’t any limit on the interest deduction you can claim. To obtain the full range of benefits under Section 24, your property must be constructed within 5 years from the end of the financial year in which you took the loan.
Section 80C’s Principal Deductions
This Section gives you principal deductions of up to Rs.1.5 lakh per financial year. This applies to both self-occupied or let-out properties. However, in order to make a proper claim, you should not sell your property during the first 5 years of possessing it. If you do so, your claimed deductions will be overturned and added to your income for the year in which you sell the property. Apart from principal deductions, this Section also allows you to claim expenses like registration fees and the stamp duty on a home loan up to Rs.1.5 lakh in the year in which you incur them.
Section 80EE’s Benefits for First-Time Buyers
If you are a first-time buyer and have availed a loan between 1st April 2016 and 31 March 2017, then you can claim additional annual interest deductions up to Rs.50,000 via Section 80EE. To claim this, your loan amount should be less than Rs.35 lakh and the property value less than Rs.50 lakh.
Interest Deductions During the Pre-Construction Period
At times it can be more economical to buy an apartment that is currently under construction. Normally, builders require you to start paying EMIs before the property is completed. To help you own a house affordably, IT laws allow for deductions of interest paid during the pre-construction phase also.
This pre-construction interest can be claimed via 5 equal instalments each made in successive financial years starting from the year in which construction is completed or you acquire the property. Nevertheless, the maximum amount you can claim as interest deductions per year still stays capped at Rs.2 lakh.
Tax Benefits When Taking a Joint Home Loan
If you take a home loan jointly with someone else such as your spouse or parent, then you stand to gain dual tax benefits. Each co-applicant can claim interest deductions up to Rs.2 lakh and principal deductions up to Rs.1.5 lakh through Sections 24 and 80C of the IT Act respectively. The condition here is that both loan applicants be co-owners of the property as well.
To make owning a home even more affordable, choose a home loan that has a nominal interest rate Home Loan. Apart from having one of the lowest interest rates in India, it also offers you outstanding features such as nil charges on prepayments and foreclosures. In order to make your EMIs pocket-friendly, you can choose a tenor spanning up to 240 months. You can use the property dossier offered by Bajaj Finserv to settle on the right home and even refinance your existing loan to capitalise on the home loan transfer benefits. In case, you are a first-time home-owner, you can also avail of attractive PMAY CLSS subsidies here.
Now that you are aware of the home loan tax exemptions and benefits and know where to get economical housing loan rates, take the next step and apply for a home loan.
If you are a first-time buyer and have availed a loan between 1st April 2016 and 31 March 2017, then you can claim additional annual interest deductions up to Rs.50,000 via Section 80EE. To claim this, your loan amount should be less than Rs.35 lakh and the property value less than Rs.50 lakh.
Interest Deductions During the Pre-Construction Period
At times it can be more economical to buy an apartment that is currently under construction. Normally, builders require you to start paying EMIs before the property is completed. To help you own a house affordably, IT laws allow for deductions of interest paid during the pre-construction phase also.
This pre-construction interest can be claimed via 5 equal instalments each made in successive financial years starting from the year in which construction is completed or you acquire the property. Nevertheless, the maximum amount you can claim as interest deductions per year still stays capped at Rs.2 lakh.
Tax Benefits When Taking a Joint Home Loan
If you take a home loan jointly with someone else such as your spouse or parent, then you stand to gain dual tax benefits. Each co-applicant can claim interest deductions up to Rs.2 lakh and principal deductions up to Rs.1.5 lakh through Sections 24 and 80C of the IT Act respectively. The condition here is that both loan applicants be co-owners of the property as well.
To make owning a home even more affordable, choose a home loan that has a nominal interest rate Home Loan. Apart from having one of the lowest interest rates in India, it also offers you outstanding features such as nil charges on prepayments and foreclosures. In order to make your EMIs pocket-friendly, you can choose a tenor spanning up to 240 months. You can use the property dossier offered by Bajaj Finserv to settle on the right home and even refinance your existing loan to capitalise on the home loan transfer benefits. In case, you are a first-time home-owner, you can also avail of attractive PMAY CLSS subsidies here.
Now that you are aware of the home loan tax exemptions and benefits and know where to get economical housing loan rates, take the next step and apply for a home loan.
