Income Tax Deductions and Your Home Loan
Are you in the process of taking a home loan? If yes, then there are some important tax deductions you should know about. The various sections of the Indian Income Tax Act have tax regulations on home loans. It is helpful to know how these sections affect your home loan.
Tax Benefits: Home Loan and Section 24
This section caters to the interest you pay on your home loan. Here are the main tax concessions available on your home loan under Section 24:
- You can get up to Rs.2 lakh as the tax benefit in a year on your home loan interest payments.
- Suppose you rent out the property for which you took the house Then there is no limit on the tax deduction. In that case, the entire interest amount can be deducted from your taxable income.
- Say, the construction of the house is not completed within five years. In that case, the deductible amount reduces from Rs.2 lakh to Rs.30,000.
Tax Benefits: Home Loan and Section 80C
This section offers the tax deduction on home loan on the principal amount. You can get a tax discount of up to Rs.1.5 lakh a year. This applies to payments made towards the principal component of your home loan. The amount you pay as stamp duty and registration fees also qualify for tax deductions under Section 80C. A few things to remember here are listed below:
- You can only claim this benefit after the construction of the house is complete.
- You can claim the tax rebate for multiple properties for which you have taken house
- You can get the rebate whether you live in the house yourself or you rent it out.
Tax Benefits: Home Loan and Section 80EE
The next critical section is 80EE. Some of the tax benefits available here are as follows:
- You get a tax benefit under Section 80EE only if you are a first-time homebuyer.
- You get a rebate on the interest repayment, over and above the deductions of Section 24.
- The maximum tax rebate available under this section is Rs.50,000.
Some conditions need to be met to enjoy this tax benefit:
- The benefit is not available if you have bought a house in the past.
- The price of the property should not exceed Rs.50 lakh.
- The home loan should be of a maximum value of Rs.35 lakh.
Getting the Best Home Loan
It is very handy to get all these tax benefits on your housing loan. But you should look for savings right from the start—when you begin shopping for a house loan. Look out for a home loan provider that offers you an adequate loan at an affordable home loan interest rate. For instance, Bajaj Finserv provides home loans of up to Rs.3.5 crore over a 20-year-period. It would also help to look at the pre-approved offers available to you from different lenders.
Loan Repayment
The Indian government has endeavored to encourage citizens to buy homes. One such endeavor is the tax benefit for first-time homeowners under Section 80EE. So, yes, home loans are far from cheap. But loan borrowers can enjoy various income tax deductions under the rules for income tax, India.
However, be sure to pay off the home loan EMIs on time each month. Don’t take this lightly, as housing loan repayment is of utmost importance. Any delay or default will result in your credit score dropping and a blip in your credit history.
The Final Word
Choose a good housing loan from a reliable loan provider and get set to own your dream house. Keep the points mentioned above in mind and file your tax returns accordingly. Make sure to claim all the available the tax deductions for which you are eligible.
