How You Can Maximise Your Tax Savings on Home Loans
Tax Savings on Home Loans: Buying a house is perhaps the most crucial life goal for most of us. From the day we start earning, we work towards saving enough money to buy a house for ourselves. In terms of economic relevance, purchasing a home is considered essential because of its significance as an appreciating asset.
Like any other long-term goal. However, purchasing a home too requires a significant amount of financial discipline. And planning to accumulate the required amount of savings. For those who don’t want to wait for long, opting for a home loan instead can help seal the deal. A home loan can help you meet the necessary fund requirements.
If you too are considering the option of taking a home loan or have already made one, then there’s more than one reason for you to rejoice. While your home loan can help you pay for your dream house, repaying the loan can help you minimize your tax liability.
The Indian government encourages citizens to invest in a house, for it is a secure asset. That is why it offers tax deductions for the same, under section 80C of the income tax Act. Also, on purchase of a house on a home loan, you get multiple tax benefits that significantly reduce your tax payments. You can avail these tax-saving benefits on the following –
Interest Paid on Home Loan
Firstly, to avail the deduction, the construction or purchase of the house must be completed within five years of the financial year in which you have taken the loan.
As per section 24, as against the interest paid on loan, you can claim a deduction for a maximum limit of Rs 2 lakh from your total income, in case of self-occupied property. However, in case of let out the farm, then there is no upper limit for claiming interest. Also, note that the overall loss you can claim under the head of House Property has limited to Rs 2 lakh only.
Interest Paid During Pre-Construction Period
The income tax law also provides you for the claim of interest paid during the pre-construction stage too, called the pre-construction housing loan interest rate. The deduction is made in five equal installments, that start from the year of acquisition of property or when construction gets completed.
You can claim this deduction over and above the deduction you can request from your house property income. However, maximum eligibility capped at Rs 2 lakh.
A maximum deduction of Rs. 1.5 lakh is what you can claim on the principal portion of the EMI provided. You do not sell the property within five years of getting possession or else. You will have to add the deduction claimed earlier to your income in the year of sale.
Stamp Duty and Registration Charges
You can claim a deduction for expenses such as stamp duty and registration charges under Section 80C. Such an inference is subject to Rs 1.5 lakhs maximum limit, and also requires that you claim in the same year in which you incur them.
Additional Deduction Under Section 80EE
Section 80EE also allows you other deductions for a maximum limit of up to Rs 50,000. The requirement for making such a claim is that your loan amount should be Rs 35 lakhs or less, with the value of the property not more than Rs 50 lakhs.
Also, the loan should have been sanctioned between 1st April 2016 to 31st March 2017, along with the condition that on the date of loan sanction, the individual does not own any other house. This Section 80EE has been made effective again from FY 2016-17.
Additional Deduction Under Section 80EEA
The budget 2019 announced other deductions under Section 80EEA for home buyers with a maximum limit of Rs 1.5 lakh. However, you can claim this deduction when the stamp value of the property is not more than Rs 45 lakhs, and that the loan must have been sanctioned between 1 April 2019 to 31 March 2020.
Also, the individual making a claim should not own any other house on the date of loan sanction and should not be eligible under section 80EE also.
Joint Home Loan
Under joint home loan, you and the other holder can both claim a deduction for interest paid up to Rs 2 lakh each and repayment of principal amount u/s 80C for up to Rs 1.5 lakh each. However, both you and your joint holder should also be co-owners of the property that s taken on loan.
Maximize Tax benefits with Home Loan
So, now you know how a home loan can help you avail various deductions to maximize your tax benefits. Before zeroing down on one home loan; however, it will help if you could check out the available loan options and the applicable home loan interest rates.
Home loan rates in India play an essential role in influencing your decision of purchasing a loan. It is; therefore, advisable that before applying for a loan, you spend some time checking and comparing home loan rates apply for different loan options. This way, you can opt for the best possible loan agreement that aligns with your requirements.
Home loan options from reputable institutions such as Axis Bank offer easy loan application, faster disbursals of the loan amount, easy repayments, and flexible loan tenures (up to 30 years).
Overall, purchasing a home loan reduces the time by comparing easily different home loan interest rates. So that you can easily finance your dream of buying a house, without any hassles while maximizing your tax benefits.