Every individual dream to own a house. However, owing to the high costs associated with building a house, one can hardly manage the funds required. In cases such as these, availing a home loan becomes a wise option. Moreover, to encourage individuals to invest in building a property, the government of India provides various tax benefits under the Income Tax Act, 1961.
Before one decides to go for a home loan, he must be aware of all the tax benefits associated with the home loan as it helps one save a considerable amount on the tax payments.
Facts regarding home loan tax benefits
A home loan is one of the best choices to save tax. According to the provisions mentioned in the Income Tax Act, 1961, three sections state home loan tax benefits. Section 24, 80C, and 80EE are the sections associated in this case.
About Section 24
Section 24 is responsible for the deduction on the yearly interest that needs to be paid on property loans. Rs. 2 lakhs is the maximum deduction that can be claimed in this case if the property is self-occupied. It is applicable for co-owner or co-borrower also. You need to ensure that the construction of the property is concluded in five years; otherwise, you would not be able to assert the deduction of Rs. 2 lakhs. If the construction is not done within that period, the maximum amount of deduction is Rs. 30000.
About Section 80C
Section 80C is concerned with the deduction of the principal amount. Every year a claim of Rs.1.5 lakhs, as a deduction can be asserted in both the cases. There are no different rules for self-occupied or let-out property. In this case, the construction of the property must be done before applying for the tax deduction. Besides this, it is crucial to make sure that the property is not disposed of in tenure of five years from the time it was possessed. In the case of a co-borrower or co-owner, each of the owners can apply for the maximum tax deduction up to Rs. 1.5 lakhs. Along with this, the stamp duties and the fees for registration of the property can also be claimed under this section.
About Section 80EE
The benefits lie under section 80EE are applicable for the home loans taken between 1st April 2016 and 31st March 2017. The value of the property must be less than Rs. 50 lakhs. The maximum amount of the home loan should be Rs. 35 lakhs. In this case, there is a way to claim the interest of Rs. 50000 every year as an additional. This will be continued until the repayment of the loan. This benefit can be enjoyed by the people who are buying a house for the first time. Apart from the 80EE, the loan seekers can also avail of the benefits of Sections 24, 80C, and 80 EE.
Steps for Calculating Tax Benefits on Home Loans:
The best way to calculate the home loan tax benefits is to use an online tax calculator. The basics details which will be needed to be entered regarding this are:
- Total Loan Amount took as Home Loan
- The tenure of the Loan
- The rate of interest.
- The date of the start of the Loan
- The total amount of Gross Annual Income
- The amount of existing deduction provided as per section 80C
- First, the amount of tax deduction is to be calculated.
- It must be ensured that the applicant must either possess the property or is one of the co-owner.
- The certificate of the home loan interest must be submitted to the employer for adjusting the deductible amount of tax at the source.
- In cases where the step mentioned above is not applicable, the tax return must be submitted by him.
Avail the fullest Utilization of Home Loan
In most cases, the more significant part of the millennial prefers to work in partnership. Within the modern age, where both parties are working, investment becomes easy. In such a case, a joint home loan can be regarded as one of the suitable options. It is a lucrative option plus also comes with tax savings benefits. As per this scheme, both the partners can claim for a deduction upto 3 Lakh, as per Section 80 C. Also, by applying Section 24, the tax deduction can reach upto Rs 4 Lakh from Rs 2 Lakh.
At times, a home loan becomes a financial burden for an individual. But, using it wisely can help reduce the burden and increase the tax deductions.
It’s time to fulfill your dream and avail a Home Loan. While repaying the loan you can take advantage of improving your credit score and also take tax advantages.
Home Loan comes up as the most lucrative form of the option. You have a capital gain as you will own your own property. The payment medium is very flexible, and tax savings are the main bonus.