Every once in a while, we all desire to buy that dream house of ours. But with increasing property prices, it only remains a dream. However, with numerous banks and financial institutions offering variations for a home loan, you can make the most of buying that home and saving at the same time. When you apply for a home loan, not only can you make the most of a higher sanction amount by meeting all the specific requirements, but also enjoy tax benefits on the home loan.
People taking home loans can avail of various tax benefits under section under sections 24, 84C, and 80EE of the Income Tax Act 1961. Saving on multiple taxes benefit on a home loan for all income profiles helps in reducing the total outgo of the tax. The tax benefits on a home loan can be availed both on the principal repayment and the interest.
3. Tax deduction for a home loan is applicable only when the construction of the property is complete and not during the term when the property bought under construction.
4. The tax rebate is not valid for customers who invest in properties that are under construction (not until the construction is completed). Such customers are, however, have to pay service tax on the loan that they have taken to purchase the property.
5. Not only principal, but the interest paid on a home loan is also allowed as a deduction. Under Section 24, there is a maximum of 2 lacs deduction which is allowed for loans on a self-occupied property. Also, there is no maximum limit applicable for deduction towards the property which is let out. However, in one financial year, you can claim a maximum of 2 lacs only, and the remaining has to be carried forward to next year. This carry forward is allowed for up to 8 years.
6. There is an additional benefit of 50,000 available for claiming interest on a home loan under 80EE. To claim this deduction, the amount of loan taken should be Rs 35 lakhs or less and the value of the property should not exceed Rs 50 lakhs. The loan must have been sanctioned between 1st April 2016 to 31st March 2017. And on the date of sanction of loan, the individual does not own any other house.
7. If you are not claiming deduction under section 80EE, then you can claim an additional deduction of 1,50,000 under section 80EEA subject to certain conditions. To claim this deduction, the stamp value of the property does not exceed Rs 45 lakhs. The loan must have been sanctioned between 1 April 2019 to 31 March 2020. And on the date of sanction of loan, the individual does not own any other house. The individual should not also be eligible to claim deduction under section 80EE.
Written By: Navya Jain