Housing loan borrowers can avail of tax benefits under several sections of the Income Tax Act. These benefits include deductions from their repayment principal, interest and other charges.
Regardless, applicants must know everything about home loan tax benefit to plan their finances accordingly.
Home loan tax sections and their benefits
Here are the tax sections under which one can save taxes on a home loan:
- Section 24B
Under this section, one can avail of deductions on the interest paid in a financial year. This is applicable in the case of both under-construction or ready-to-move properties.
Therefore, a borrower is liable to receive deductions up to Rs.2 lakh on a fully constructed residential property. However, the deduction is available after the completion of construction.
Alternatively, during pre-construction periods, the annual interest component of the housing loan EMI is available in 5 equal instalments. However, the construction work needs to be completed within 5 years from the day of loan approval for a borrower to claim benefits.
- Section 80C
This section of the Income Tax Act states that there are deductions on a principal amount of the loan under certain conditions. Homeowners securing a home loan can avail of principal deductions of up to Rs.1.5 lakh for every year of repayment until the liability is over.
However, this deduction is available to those borrowers who do not sell their property within 5 years of acquisition.
Furthermore, one can enjoy stamp duty and registration fee deduction on their loans for the year of payment of such charges. A deduction limit of Rs.1.5 lakh is available for them.
Therefore, to accrue these benefits, borrowers must secure a home loan from reputed financial lenders. Such lenders offer a substantial loan amount at a low home loan interest rate. Additionally, some of them provide pre-approved offers for a hassle-free loan application process.
Now that individuals know about the home loan tax benefits, they can refer to the following section to understand how to claim such benefits.
How to claim tax benefits on a home loan?
The tax benefit claim process varies depending on the borrower type. Salaried applicants must follow the below-mentioned steps to claim tax benefits:
- One needs to confirm the ownership of the property before applying for a claim. Joint borrowers must ensure both of them owns the property.
- They can calculate the Income Tax benefits they are eligible for by using an Income Tax calculator.
- Borrowers must obtain an interest certificate from their lender and deliver it to their employer for TDS adjustment.
Other than the above method, one can also claim housing loan tax benefits while filing annual Income Tax Returns. All they need to do is present the interest certificate and opt for a successful claim.
However, self-employed personnel need not follow steps for a tax benefits claim. Instead, they need to file ITR to claim such benefits.
Additionally, joint home loan borrowers can also avail of Income Tax benefits upon meeting home loan eligibility criteria for tax claims.
Home loan tax benefits for joint owners
Depending on the property ownership, loan liability, and stage of construction, joint owners of a property can claim the following benefits:
- Interest deductions up to Rs.2 lakh each is available for both the owners of a self-occupied property.
- For property let out, there is an unlimited interest deduction limit for each borrower.
- After complete loan repayment, an applicant can claim an annual deduction of up to Rs.2 lakh on the principal amount. Furthermore, if a co-borrower does not contribute to the repayment liability for joint home loans, the other party can claim benefits for both the principal and interest amount. Therefore, one can increase their tax benefits on a home loan by opting for a joint loan.
Therefore, upon completing loan repayment, one can avail of the aforementioned home loan tax benefits based on their contribution.
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