With real estate prices following an upward trajectory, availing a home loan to purchase a house proves a calculated financial move. Property ownership using loans brings many benefits, the most noteworthy being home loan income tax benefits. The Income Tax Act of India, 1961, enables borrowers to enjoy exclusive tax deductions on credit under its various Sections. This article elaborates how you can save more with housing loans and possess your dream property effortlessly.
How to calculate tax benefits on a home loan?
Housing finance companies nowadays offer an online income tax calculator, a simple digital tool to check income tax liability for a particular fiscal. Individuals need to provide accurate details of their age, payment towards housing loans, deductions, overall income, etc. Without any manual calculation, the tax calculator instantly shows the total income tax benefit they can avail. The best tool also displays the payable income tax before and after a home loan, thus, making financial assessment easier.
What are the tax benefits of housing loans?
A housing loan is typically taken to purchase or construct a residential property. Once availed, the credit needs to be repaid in small and manageable EMIs comprising both the principal and the interest amounts. Under the Indian Income Tax Act, some significant Sections define the home loan tax benefits that borrowers are eligible to enjoy.
1.Section 80C
The Section entitles a borrower to claim tax deductions up to Rs.1.5 lakh on the principal component. This benefit is available on both self-occupied, vacant and rented-out properties. However, its construction must be completed within five years from the financial year’s end when the borrower took the home loan. Once eligible, the borrower can claim this deduction every year.
The expenses of stamp duty and registration are often included in this deduction. For that, the construction should be complete.
Another condition is that borrowers cannot sell the property they have constructed or purchased using the credit within five years of possession.
2.Section 24
Under Section 24, borrowers can enjoy tax benefits on home loan interest payable. The maximum amount eligible for deduction is up to Rs.2 lakh on a self-occupied house. However, for rental property, there is no such maximum capping as the entire amount is waived off.
Again, these tax deductions are available only if the property construction is completed within five years. If the construction doesn’t finish within this specified period, the borrower can only claim up to a maximum of Rs.30,000.
Besides, individuals can check out more details on home loan tax benefits for under-construction properties.
Benefits of taking a joint home loan
Home loans taken jointly are one of the easiest ways to improve eligibility and get approval. If individuals avail credit with their spouse or other family members, they will be eligible for exclusive tax benefits on the joint home loan.
Under the Income Tax Act, each of the co-applicants can claim up to Rs.1.5 lakh as a tax deduction on the principal repayment and up to Rs.2 lakh on payable interest individually. They must, however, claim deductions under Section 80C on registration fees and stamp duty in the same financial year.
In addition, both the co-applicants must be co-owners of the property to avail this home loan income tax benefit.
Ways to apply for a home loan
After knowing about the benefits of a housing loan, prospective home buyers can meet the eligibility parameters and apply using an online application form. Alternatively, they can look for pre-approved offers.
Pre-approved offers from housing finance companies simplify the application process and make it less time-consuming. Borrowers can avail pre-approved offers on a variety of financial products like home loans, loans against property and more. To check their pre-approved offers online, all individuals have to do is provide their name and contact details only.
A home, is an individual resource that you have longed for possessing for quite a while now. On the off chance that you are intending to purchase a home, there are two things that you consider: a home and a not-really beautiful generally undeniable home credit. Notwithstanding, what makes the biggest difference is fitting the bill for the home credit. Banks must survey your reimbursement capacity, which is basically assessed based on your income, costs, reserve funds, work profile, monetary ability and reimbursement history of advances and different contribution.
Home loan is a worthy financial aid which helps people overcome property buying difficulties effortlessly. Understanding the advantages borrowers are entitled to will help them approach the best HFC to enjoy maximum home loan income tax benefits on their housing loan.
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