Income tax benefits on home loan principal and interest
Applying for a home loan usually means you are nearing the prospect of owning your dream property. And taxation laws that let you reap benefits is further encouragement to home buyers.
Tax benefits on repaying home loan principal
When you repay the principal amount of your home loan, Section 80 C of the income tax act lets you avail of a tax deduction of about Rs. 1.5 lacs. You are eligible for this benefit only after the construction is completed. If you wish to sell the property within five years of possessing it, the benefit will be reversed. In this case, the amount you claimed will be added once again to your income in the year of sale of the said property. Under this section, you can also claim the amount payable on registration and stamp duty irrespective of whether you are taking a home loan or not.
Tax benefits on home loan interest repayment
As per Section 24, it is possible to claim deductions with regard to the interest payable on your home loan. When you occupy the property yourself, the amount you can claim to be exempted is Rs. 2 lacs. However, to get this benefit, the construction should have been completed within five years. If the construction time exceeds five years, you the limit you can claim drops and you can claim only up to Rs. 30,000. In case you are not occupying the property, there is no upper limit on how much exemption can be claimed irrespective of the status of completion.
Tax benefits for first time homebuyers
In addition to claiming deductions on the amount payable towards the principal and interest of your home loan under Section 80 C and Section 24, it is also possible to claim an extra Rs. 50,000 per financial year towards the payment of interest. To avail of this benefit, it is incumbent that the total value of your house is Rs. 50 lacs and the total value of the home loan is less than Rs. 35 lacs.
Tax benefits for Joint Owners and Co-Borrowers
If you apply for a joint home loan together with your spouse, relative or friend, you can claim tax benefits provided you also co-own the property. Each of you can submit your claims independently up to the full amount under Section 80 C and Section 24. Hence if you wish to go for tax saving, this approach will let you boost up your savings in a significant way.
HRS and home loan
When you have taken a home loan, but continue to stay in a rental property, it is possible for you to make two claims. You can submit claims to avail of the aforementioned tax benefits and also tax benefits connected to HRA or house rent allowance.