Many people want a home, but the majority of us cannot afford one right now. That’s where home loans come in: by spreading the cost over time, they provide a path to homeownership. Aside from the evident tax benefit, home loans also carry several other significant Benefit on Home Loan that can ease financial burdens and increase the allure of homeownership. Let’s examine the operation of Tax Benefits on Home Loans.
Tax Benefit on Home Loan Summary
| Deductions | Section | Maximum Deduction (INR) | Conditions |
| Principal | 80C | 1.5 Lakh | Property owned by a home should not be sold within five years of purchase. |
| Interest | 24b | 2 Lakh | The loan must be used for the purchase or construction of a home, and the building project must be finished within five years of the end of the applicable fiscal year. |
| Interest | 80EE | Rs.50,000 | The property’s value should not exceed Rs 50 lakh, and the loan amount should be no more than Rs 35 lakh. The home loan must be taken out between April 1, 2016, and March 31, 2017. |
| Stamp Duty | 80C | 1.5 Lakh | It is only eligible for a claim in the year that these costs are incurred. |
| Interest | 80EEA | 1.5 Lakh | The property should have a stamp value of no more than Rs. 45 lakh. Section 80EE does not allow the taxpayer to claim a deduction. The period for taking out the home loan is April 1, 2019, through March 31, 2022. |
What Exactly is a Home Loan?
A home loan is a substantial sum of money that lenders give you to help you buy the house of your dreams. Lenders may cover between 75 and 90 percent of the cost of the house you buy, depending on your eligibility for the loan and funding standards.
To find out if you qualify for a home loan, use the home loan eligibility calculator. The approach taken by lenders regarding loan repayment can be varied based on the construction phase. The loan amount may be opted to be settled either completely or in periodic installments after your initial deposit is received by the lenders. If the loan is disbursed partially, interest will only be levied on the disbursed sum by the financial institution.
Interest Deduction on Principal Repayment
The principal and interest amounts are two parts of the EMI that you pay. Section 80 C of the Income Tax Act of 1961 allows you to deduct the amount you repaid as principal in the EMI for a self-occupied property. If you own a second home where your parents live or if it is vacant, it is considered self-occupied property.
You can claim a tax deduction of up to 1.5 lakh on the principal amount paid in EMIs for both homes purchased with a home loan. If you rent out the second house, it is classified as a let-out property, and you are still eligible for the home loan tax credit. You may also claim the registration and stamp duty fees you paid when you purchased your home.
Deduction on principal repayment under Section 80C
In Section 80C, you can deduct the annual principal paid on the home loan EMI. You can claim a maximum of Rs 1.5 lakh. However, to be eligible for this deduction, you must not sell the home property within five years of ownership. If you do, the deduction you previously claimed will increase your income in the year of sale.
Additional deduction under Section 80EE
- The property’s value should not exceed Rs 50 lakh, and the loan amount should be no more than Rs 35 lakh.
- The loan had to be approved between April 1, 2016, and March 31, 2017.
- Additionally, the borrower is a first-time homeowner and does not own any other properties as of the loan sanction date.
Deduction for a joint home loan
If the borrowers take out the loan jointly, each loan holder can deduct up to Rs 2 lakh in home loan interest and Rs 1.5 lakh in principal repayment under Section 80C from their tax returns. To qualify for this deduction, they must ensure that they are co-owners of the borrowed property.
How Do I Get Tax Breaks on Home Loans?
- Establish the amount of the claimed tax deduction.
- Verify that you are the co-borrower on the loan or that the property is in your name.
- Give your employer the interest certificate from your home loan to modify the tax deduction at the point of origin.
- You will have to file your tax return on your own if you skip the previous step.
- You are not obligated to turn in these documents anywhere if you work for yourself. Just have them available in case the IT department needs them later.
FAQ of Tax Benefit on Home Loan
Q1. Who is eligible for housing loan tax deductions?
A. The only people who can deduct taxes from home loans are the property owners. Each borrower may deduct home loan interest according to their ownership ratio if the loan is taken out jointly with their spouse.
Q2. Who can take advantage of home loan tax deductions?
A. In addition to being eligible for tax benefits, the property owner’s spouse may also be eligible for tax deductions if they are co-borrowers. Based on their portions of the loan payments, both parties can benefit tax-wise from a joint loan.
Q3. How long do I have to wait to receive my approval?
A. Decisions about loans are made in under a week. As soon as we make a decision, you will receive an SMS on the registered mobile number.