Everyone wishes of buying their property, that’s why opting for a financing alternative like a Home Loan is the best option when you don’t have enough savings to finance the purchase yourself. It’s the right time to avail a home loan as financial institutions in India are offering extremely competitive Home Loan rates, A Home Loan does not just give you financial help for that big huge investment, but it also lets you claim a higher tax deduction on the repayments.
Here are listed some tax-saving rebates you can enjoy the tax benefit of when you opt for a Home loan from any financial institution.
Individual Home Loan Application Cases
Section 24 of the IT Act provides the provision of claiming a couple of tax rebate; you can get a tax deduction of up to Rs.2 lakh on the interest paid on your Home Loan and under Section 80C, a maximum of Rs.1.5 lakh can be claimed for tax deductions on the principal amount. This benefit, though, can be enjoyed when you’re occupying the property or keeping it vacant -IT Act. The 2016 Union Budget proposed that the time limit for getting tax exemption for under construction properties be raised from 3 years to 5 years after completion.
As far as the current budget is concerned, you can avail of tax benefits on the interest within five years of moving into your property. The period starts at the end of the financial year in which the loan was claimed. However, this has been in effect since April 2017.
You can claim tax benefits for pre-interest charges for the same financial year even if your property isn’t completed. You can also claim a tax deduction on the amount you paid on stamp duty and registration charges for your property. According to Section 80C of the Income Tax Act, the maximum claimable amount in such cases is Rs.1.5 lakh.
Joint Home Loan Applicants Cases
You can go for a Joint Home Loan if the loan amount you’re eligible for isn’t enough to cover the cost of the property to claim a higher loan amount and divide the burden of paying EMIs. You can apply for the loan with anyone be it your siblings, parents, or spouse. Banks find it suitable when the co-owner of the property is also the co-applicant.
Applying for a joint home loan, just in case of EMIs, even the tax benefits get shared amongst the co-applicants. Under Section 80C both co-applicants can claim up to Rs.1.5 lakh on the principal amount and Rs. 2 lakh on the interest payment under Section 24C as tax exemption every year.
Things to keep in mind for the First-time Home Buyers
If you are a first-time home buyer, there’s an additional tax rebate you can claim apart from the benefits mentioned above.
The Finance Minister introduced in the recent budget an additional tax deduction on the interest charged on Home Loans. You can avail of an additional deduction of Rs. 50,000 on the interest charges if the property’s cost doesn’t exceed Rs.35 lakh. In the case of leased property, one can claim a tax deduction on the entire interest paid over the duration of the loan.
Things to check for Multiple Property Owners
A 30% standard deduction is allowed on the total taxable value of your property as per The Income Tax Act. This money can be used to cover maintenance, home insurance, or other house-related expenses. Under Section 80C of the Income Tax Act, interest up to the amount of Rs.1.5 lakh is eligible for tax exemption.
There is also a provision to claim the municipal taxes you paid against your rental income during the fiscal year as a deduction under the ITA, 1961, though the deduction is valid only for the current year.
The annual rent you get from a rented property is taxed after the standard 30% deduction, the municipal taxes you pay. Planning to get a Home Loan is not a difficult task anymore, as many financial institutions offer you to apply for it online. You can take the help of a financial analyst, or any official in a bank to clear your queries regarding the loan application procedure. Always apply for Home Loans only when it is at adequate interest rates and EMI’s.