A Few Home Loan Tax Benefits that You must Know

Did you know that availing a Home Loan not only helps you fulfil your long craved dream of purchasing your own dream home but also provides many more benefits?

Other than offering you the finance to buy a home of your choice, there are also some key Home Loan tax benefits that it offers.

As the Home Loan repayment includes principal and interest amount repayment, it is a bigger liability for a longer duration, so how do you save money on it? By repaying the interest, and the EMIs, you can avail some Home Loan tax benefits. Have a look.

The Interest

When you avail a Home Loan you also need to pay the interest portion along with the original EMI. Some lenders may charge you the higher Home Loan rates and that may make it expensive for you. As a result, you can easily avail income tax exemption on Home Loan interest payment up to Rs.2 lakh. You can also claim the interest deduction for a home that is still under construction. When you claim the interest cut-off, the final interest figure gets deducted from your income and the final taxable income amount is abridged.

The Principal

You are entitled to ask for the repayment of your principal amount up to Rs.1,50,000 under the Section 80C of the Income Tax Act. While filing the tax returns, mention the amount that you pay towards principal on EMIs and then the money will be cut from your taxable income. You won’t be able to sell off your home for at least a period of 5 years while claiming tax benefits on the principal repayment amount. Even if you sell your home before 5 years, then there will be an addition of the principal amount into your taxable income yet again.

Registration and Stamp Duty

Even if when you pay the stamp duty and the registration fees for your home, you can still claim these outlays as income tax deductions for the year. The Section 80C of the Income Tax Act has the provision to let you enjoy benefits up to a maximum amount of Rs.1,50,000

Pre-construction Benefits

To ask for tax benefits on Home Loans, you will need to wait until the year the construction of your home gets completed. Nonetheless, you are still eligible to enjoy pre-construction interest deductions for that year as well. You can go ahead and calculate the total amount paid as interest during the construction and include it in the tax returns for that year. However, it will be always combined with the remaining of your interest deductions. Thus, the interest deductions for both phases can’t be more than the allowed limit of up to Rs.2 lakh.

Co-owner Home Loan Tax Benefits

If you availed a Home Loan for the purchase of your home along with a co-applicant who is employed, both of you are entitled to deductions on the same loan. You both can claim principal repayment and interest deduction to the allowed maximum limits separately.

The Bottom Line

When you apply for a Home Loan to finance your dream home, you can easily avail the benefit of moving into your own home. Other than enjoying the warmth and comfort of your own home, you can also enjoy tax benefits on Home Loans as discussed.

Why wait and slip on the chance of having your own home? You can go ahead and apply for the Home Loan as per your needs and budget online!