Buying a house is a big decision, with so many different factors to consider. In this entire hullabaloo of queries pertaining to home loan, we tend to overlook the importance of tax benefits. Did you know there were tax benefits on home loans? Yes, there are a lot of ways you can gain tax benefits on a home loan.
Here are Some of The Important Tax Benefits You Must Know:
1) Tax Deduction on Interest Repayments
When you take a Home Loan, you have to repay the loan through EMIs. Did you know that you can claim a deduction on the interest repaid under Section 24 of the Income Tax Act? If you live in the property, you can claim a maximum deduction of up to Rs.2 lakh per year for interest paid. If however, if you do not occupy the house, there is no upper limit on the exemption you can claim for interest paid.
2) Tax Deduction on Principal Repayments
It is also possible to avail a tax deduction on the principal portion of the EMI. This is applicable under section 80C of the Income Tax Act. Every year, you can claim a deduction of Rs 1.5 lakh under this section.
3) Section 80EE
First-time home buyers have more benefits to claim. Under Section 80EE of the Income Tax Act, you can claim a deduction on interest paid on the home loan. Make sure to note that this deduction is applicable in addition to the tax deduction under Section 24. The upper limit is Rs 50,000 per financial year. You can claim this deduction until the end of your loan tenor.
4) Stamp Duty and Registration Charges
When you buy a house, stamp duty and registration charges are inevitable. But you can claim tax benefits on these expenses too. Under Section 80C, a deduction of up to Rs.1.5 lakh is allowed on such payments. Remember, you can claim deductions only in the year that you pay such charges.
5) Pre-Construction Tax Benefits
As a homeowner, you can claim a deduction on interest payments. But the caveat here is that you can do so only from the year in which the construction of the house is complete. However, you can start claiming pre-construction interest from the same year your house is built. According to the India tax law, you can claim the deduction in five equal installments. The pre-construction tax benefits are capped at Rs.2 lakh a year though.
6) Joint Owners Tax Benefit
These days, a lot of people take joint home loan with their parents or spouses. This offers many advantages including larger tax benefits. For example, if you take a joint loan with your spouse, you can each claim a deduction up to Rs.2 lakh on interest payment. You can each claim a deduction of up to Rs.1.5 lakh on principal repayment separately. But you must also be co-owners of the property to be eligible for these tax benefits.
To sum up
For most people, buying a house is not an everyday affair. It comes with a lot of expenses. But with these tax benefits, you can gain a certain amount of financial relief. This would come handy when you make all the payments through the course of your loan term.