It is a big decision to buy a house and there are many factors, which one must consider before buying a home. But the importance of tax benefits on the home loan is an important one and should not be overlooked.
There are people who don’t know there are tax benefits on the home loans. There are lots of different ways in which one can gain tax benefits on the home loan. Some of the important tax benefits that you must know are as follows:
1) Tax deductions on the interest repayments
In case you are opting for a home loan, you will be required to pay the loan through the mode of EMIs. The good news is that now you can claim a deduction on interest paid. A maximum deduction of 2 Lakhs can be achieved on an annual basis. In case you do not occupy the house, in this case there is no upper limit on the exemption that one can claim for the interest paid.
2) Tax Deductions on the Principal Repayments
In case of paying the EMIs a tax deduction on the principal payment can also be obtained. This law is applicable under the 80C section of the Income Tax Act. Under this section, a deduction of maximum 1.5 Lakh can be obtained.
3) Section “80EE”
There are many benefits which can be claimed by the first time buyers. Under the section 80EE of the Income tax (IT) Act, one can claim the deduction on the interest paid for the home loan. One should make sure that this deduction is applicable apart from the tax deduction under the section 24. The upper limit for this is 50000 INR per year, One can claim the deduction, till the end of the loan tenure.
1) Stamp duty charges and registration charges
When one buys the house, charges like Stamp Duty as well as registration charges are inevitable. But the tax benefits on these expenses can also be claimed. Under the section 80C, a deduction of maximum Rs.1.5 Lakhs is permitted on such payments. The claims in these deductions can be made only for the year in which one pays such charges.
2) Tax benefits on Pre Construction
As a home owner, one can claim the deductions on the interest payments. But the key here is that one can claim these deductions only in the year in which the house construction gets completed. However, in case the house is under construction, one can claim the pre construction interest from the year the house was started to be built. Based on the Indian tax law, one can claim these deductions in the five instalments. These tax benefits are subjected to an upper limit of Rs. 2 Lakhs per year.
3) Tax benefits for Joint owners
These days, many people are taking home loans in the form of joint accounts with their parents as well as spouses. This may lead you to reap larger tax benefits. For example, you have applied for the joint loan with your spouse in this case you both can claim deduction of up to 2 Lakhs on the interest premium. On the principal repayment, you both can claim the deduction of maximum 1.5 Lakhs per year. In order to avail such tax benefits you both must be the co-owners of the property.
For most of the common people, buying a house is not daily’s affair. It is accompanied by a lot of expanses. By utilizing the tax benefits mentioned in this article, you can get a financial relief. This will be useful to you, if you are opting for a home loan in the near future.