Home loan is an offering that helps you buy the house of your dreams without exhausting your savings. With home loans, you can purchase the house you want, and repay the money in small installments as per your financial comfort. However, do you know that housing loans can help you save money too?
Yes, you can get various tax incentives in the form of tax benefits that can help you reduce taxability and save your hard-earned money on these loans. You can claim these tax benefits from your taxable income while calculating your taxability under the Income Tax Act, 1961.
If you are planning to apply for home loan or have already availed one, you must know about these housing loan tax incentives.
Tax deduction on principal repayment
As per section 80C of the Income Tax Act 1961, you can claim a tax deduction on your taxable income of up to Rs 1.5 lakh on the principal repayment of your home loan. This deduction can include stamp duty and registration charges. However, this deduction can be claimed only once.
Tax deduction on interest repayment
For interest repayment, you can claim a tax deduction of up to Rs 2 lakhs on your taxable income as per Section 24(b) of the Income Tax Act, 1961. The maximum limit of Rs 2 lakh is for a self-occupied house. If you avail a home loan to rent out the house property, there is no such upper limit to claim deduction on interest repayment. However, there is a provision to this deduction that you must know about. To claim this deduction from your taxable income, the construction of the house property should complete in 5 years. Or else, the deduction would be added to your taxable income in the subsequent assessment years.
Tax deduction for first time home loan borrowers
You can enjoy additional tax incentives if you are a first-time home loan borrower. Under section 80 EE, you claim an additional amount of Rs 50,000 on interest payment if the loan amount is more than Rs 35 lakhs. However, for this deduction, the property value should be within Rs 50 lakh.
Additional tax incentives
While availing these tax benefits, you must also know about these tax incentives available on home loans.
- If you buy the house with your spouse, you both can claim these tax deductions individually. Both the co-applicants can claim a tax deduction of up to Rs 2 lakhs.
- You can adjust the loss from house property with any other income while computing the income tax, be it salary or income from other sources capped at Rs 2 lakhs.
- You can claim the deduction on interest paid for the construction period in 5 equal instruments, starting from the date of possession.
While home loans can alter your finances and direct your budget, they can also help you save money. Ensure to use these incentives to save taxes while filing the income tax returns. Make sure to choose the best plan with attractive home loan interest rates, easy documentation process and hassle free disbursal process, today.
