When you apply for a home loan, you get a large amount as per your eligibility and other determining factors. But other than an amount to move into your dream home, you can also get some tax benefits on home loans.
Yes, it is possible to avail of home loan tax exemption and save on repayments. One can also use the home loan tax benefit calculator to know about exact tax savings.
Let’s know five types of tax benefits on home loans in this post!
A quick look at home loan tax benefits
Deduction for interest paid
When you pay your home loan EMI, it comprises two parts, interest and principal. Thus, for repaying the interest part on home loans, you can claim a deduction of up to Rs.2 lakh. It is as per section 24 of the IT Act. It is for self-occupied property, but there is no cap on a property that is let out. To claim these deductions, your home loan availed for buying or constructing a home must be completed within 5 years.
Deduction on principal payment
The principal portion of the home loan EMI for the financial year is allowed as a deduction under section 80C. The maximum amount that you can claim under this is up to Rs.1.5 lakh. But, the only condition is that the house should not be sold within 5 years of possession. If not, your tax benefit on home loans will get added back to the income in the sale year.
Deduction for stamp duty and registration charges
Other than enjoying tax benefits on home loans on principal and interest component of housing loan EMIs, you can also enjoy deductions on other things. It is on the stamp duty and registration charges. You can do that as per section 80C. The overall limit you can claim remains Rs.1.5 lakh. But the only condition is – you need to claim such a deduction only in the year such expenses are incurred.
Extra deduction of up to Rs.50,000 under section 80EE
If you are a home buyer, you can claim an extra deduction under section 80EE to the tune of up to Rs.50,000. If you want to claim these tax benefits on home loans, your home loan amount should not exceed Rs.35 lakh. Also, the value of the property must not exceed Rs.50 lakh. But, the home loan should also be sanctioned between 1st April 2016 and 31st March 2017. On the date of loan sanctioning, you should not have any other home in your name.
Deduction for joint home loans
If you have availed a home loan jointly, each of the borrowers can ask for a deduction on the housing loan interest portion up to Rs.2 lakh. For principal repayments, an amount of up to Rs.1.5 lakh under section 80C can be claimed. To ask for this deduction, they ought to be the co-owners of the property taken on the housing loan. Thus, applying for a joint home loan can help you enjoy significant tax benefits on home loans.
You are now aware of the top five ways you can enjoy tax benefits on home loans. Based on your type of repayments of the loan, you can choose one of the methods and enjoy home loan tax perks without hassles.
If you want to apply for the best home loan deal and are confused about which one to go for, you can compare all offers online. You can do that on a third-party website and choose a deal that matches your needs and repayment capacity the best.
Fulfilling a lender’s eligibility norms and submitting required documents can also help you get the loan approval faster.