The Indian Government has always encouraged customers to invest in real estate sectors. Besides, with the accelerated consumption and competitive interest rates, individuals can also avail of home loan tax benefits by opting for a home loan to meet their housing requirements.
Various provisions allow taxpayers to save a considerable amount on tax payment when choosing a housing loan. Therefore, individuals must learn about the tax sections and articles of the IT Act, 1961 to know about the benefits associated with a home loan.
Following are some of the benefits that one can avail of from a home loan:
Benefit of tax on principal repayment
Under Section 80C of the IT Act, individuals can enjoy a tax deduction of Rs.1.5 lakh on the principal amount when they avail a home loan. However, the obtained amount must be used to purchase or construct a property.
Interest repayment tax benefit
Under Section 24B of the IT Act, individuals can demand home loan tax benefits of up to Rs.2 lakh. This exception can be claimed on the interest repayment during pre-construction and post-construction of self-occupied property. This exemption is applicable if the construction of property is completed within five years from the loan date.
Besides, this section also allows an exemption on stamp duty and registration charges within the limit of Rs.1.5 lakh. Moreover, women can also claim tax benefits on home loan repayments up to Rs.1.5 lakh on principal and Rs.2 lakh on interest payment. Also, applying for joint ownership will allow borrowers to avail the benefits.
Tax benefit on loan refinancing
Under section 24B, individuals can also claim tax benefits on home loan balance transfer if they obtain a top-up loan. Here borrowers can claim a deduction of up to Rs.30, 000 on the interest repayment against the loan amount.
However, this facility is available for borrowers who successfully meet home loan eligibility criteria and maintain a healthy credit score.
Above all, borrowers must research well about the current home loan interest rate and decide the loan amount they want to borrow. Doing this calculation beforehand will allow borrowers to claim deduction on principal and interest repayments against their loans and save substantially.
Therefore, staying aware of the home loan tax benefits will assist borrowers in making an informed borrowing decision. It is advised to keep a tab on the tax updates and eligibility to ensure hassle-free processing.
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