The Income Tax Department of India provides specific home loan tax benefits. It is to keep the housing sector pink and homeowners interested in property buying.
Home loan tax benefit varies by their way of deductions. It is allowed against principal and interest repayment, and registration and stamp duty charges paid and more.
On that note, let’s check out home loan tax benefits available under various sections of the Income Tax Act in this post!
Home loan tax benefits at a glance
Payment made towards the principal component
Your home loan EMI comprises the interest and principal components. And the payment made towards the principal part of the housing loan is eligible for benefits. If the home loan is availed to buy/construct a home, then a limit of up to Rs.1.5 lakh is available for deductions. It is available under section 80C of the IT Act. Nonetheless, this deduction is reversed. If the property on which it is to be claimed is sold within a lock-in period of 5 years from the purchase date. It is possible to know about your exact EMI amount using the home loan EMI calculator.
Payment made towards stamp duty and registration charges
Expenses incurred for registration charges and stamp duty for buying a residential property can help you claim up to Rs.1.5 lakh. But you will claim such deductions only for the year you have made the payment.
Payment made towards interest paid on home loans
The total interest amount paid during a financial year is entitled to deduction during the calculation of liability of tax. If it is for self-occupied residential property, the maximum limit is Rs.2 lakh that you can claim. It is available under section 24B of the Income Tax Act. If a property is purchased using a home loan and put on rent, there stands no limit on the tax benefit amount you can claim.
Deductions on a joint home loan
Section 80C of the Income Tax Act lets both interest and principal component deductions for housing loan if availed jointly. As per the repayment amount and the contribution of the individual, each home loan joint applicant can enjoy deductions. It could be up to Rs.2 lakh on repayment of interest and Rs.1.5 lakh on repayment of principal.
However, borrowers need to be the owners of the purchased property to enjoy such home loan tax benefits.
Deductions on interest for property under construction
The deduction on the interest component of the home loan is also permitted for the pre-construction phase. It is in the event of the said property being under construction. But, for claiming such a deduction, the construction of the property must be completed within 5 years of availing of the loan.
How to avail of home loan tax benefits?
The procedure to claim home loan tax benefits differs with borrowers’ type like self-employed and salaried. To get started with the claim of tax benefits, a salaried individual needs to take care of the following aspects:
- You need to confirm that the ownership of residential property financed is in your name. For someone claiming tax benefits as a joint borrower, they ought to ensure being the co-owner of the property.
- You also have to calculate the exact tax deductions using an income tax calculator to get started with it.
- You should obtain an interest certificate from your lending institute and hand it over to your employer. It will help you with TDS adjustments.
- If you miss these steps, you can still claim tax benefits. It is also to enjoy housing loan tax advantages during their annual Income Tax Return (ITR) filing for the concerned fiscal year. For a successful claim, ensuring the availability of an interest certificate is anyway is needed.
- For self-employed home loan applicants, they don’t need to abide by steps as stated. They only have to ensure the furnishing necessary documents while filing Income Tax Return (ITR). This way, you would be able to enjoy home loan tax benefits.
The home loan tax perks are now made available to you. Based on your type of home loan application type, you can get started and pocket savings. You can begin by checking out the home loan eligibility right away! Happy tax savings!