ECONOMY

Home Loan: Tax Benefits You should Know

Introduction

With every passing day, the Indian economy is becoming more robust and powerful. And Indian lenders are propelling this massive growth by coming up with exclusive and ingenious loan offerings that cater to the diversity of Indian dreams.

Out of all loans, home loans are the most sought-after, as home loan EMIs are lesser than many other loans. Additionally, the tax benefits on a home loan make it an attractive financial instrument for saving and spending, both at the same time.

Read this article to find out how you can get tax benefits by availing a home loan and how an EMI calculator can make loan hunting easier.

What is a Home Loan EMI and How Can You Save Taxes?

A home loan EMI has two parts – principal and interest. Generally, a home loan calculator displays the EMI after including all taxes and associated fees. Under the provisions of the Income Tax Act, 1961, you can avail tax benefits on both the principal component as well as the interest component. While the tax benefits are slightly higher for a first-time homebuyer, buying a second home can also allow you to claim certain tax deductions.

Which Sections of the Income Tax Act Allow You to Save Taxes and How Much Can You Save?

By using the various provisions of the Income Tax Act, a first-time homebuyer can save as much as INR 1.5 lakh on the principal and up to INR 3.5 lakh on the interest. Let us explore the sections in detail.

1. Section 80C

Under Section 80C of the Income Tax Act, you can save up to INR 1.5 lakh a year on the principal component of the home loan EMI. You may also include the stamp duty and other charges during the calculation of tax deductions. However, remember that you can add such costs only once during the lifetime of the loan.

2. Section 24B

Section 24B of the Income Tax Act allows you to claim tax deductions of up to INR 2 lakh in a financial year. This deduction applies to the interest component of the home loan EMI. If you have invested in a property that is still in the construction phase, you can get home loan tax benefits for up to five years. If the house does not get completed within five years, you may claim no more than INR 30,000 in a financial year.

3. Section 80EE

The provisions of this section can be availed by individuals only. Moreover, you have to be a first-time homebuyer to claim tax deductions under this section. This provision allows you to claim tax deductions on the interest component of up to INR 50,000 (over INR 2 lakh in Section 24B) if your home value is below INR 50 lakh and the loan amount is below INR 35 lakh.

4. Section 80EEA

Section 80EEA can be availed by individual first-time homebuyers who are not eligible for claiming deductions under Section 80EE. Under this section, you can save up to INR 1.5 lakh on the interest component of the home loan EMI. However, to avail the benefits, the home value should be less than INR 45 lakh.

Conclusion

Depending on your home loan amount, tenure, and EMI, you can save as much as INR 5 lakh on home loan tax benefits. With home loan interest rates starting from a lowly 8.60%, this is the best time to apply for a home loan at low EMI. Apply for home loan here.


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