How to avail tax deduction benefits by taking home loan? Tips you MUST READ

Every year we have to submit our tax declaration form along with proofs to get tax deduction benefits. Especially for those who come under the Income-tax slab rates, it is a much important step to do. Some of us are aware about the investments to declare and some are not. There are sections of Income Tax under which one has to show the declaration by showing the investments. However, do we know that by taking home loan one can avail tax benefits under different sections? If not, then need not to worry. We are here to guide you about home loan Tax benefits. In addition, how you can reduce the tax liability under Income-Tax Act, 1961 by taking home loan as well.

 

Follow the lowdown and know everything about the Home Loan Tax benefits:

 

Mainly home loan comes under two formats and three Sections come under Income-Tax Act, 1961 beneath which one can avail home loan Tax benefits.

 

 

 

• The principal amount that increases every year, on that annual principal amount one can avail the tax deduction benefit. This deduction of tax comes under Section 80C of Income tax

 

 

• At the time of the construction of your home the amount which your are paying as a interest on that also one can avail the tax deduction benefit

 

 

• Section 80C Income Tax Act chiefly covers the principal repayment amount of home loan. Amount upto Rs.1.5 lakh is the total amount under which one can avail tax benefits by showing investments

• Apart from home loan, one can invest in PPF, ELSS, Mutual Funds, NPS, NSC and Tax Saving Fixed Deposits etc...(Under Section 80C)

• One can avail the benefits for self-occupied and let out property both

• Note, if one will sell the property within 5 years( after 3-4 years) of period then all the tax benefits which he or she has claimed before 5 years will be reverse

• It is also important to note that if one has not taken a home loan but the amount paid as registration fee and stamp duty while buying home is allowed to get tax deduction benefit

• Only after the construction is complete and one gets the certificate of the complete work, tax benefits can be claimed under Section 80C

 

 

• Under the Section 24 of Income Tax, interest repayment is covered which comes under two situation. One is it calculated the income from loss of property. Total loss from property limit to be claimed is rupees 2 lakh

• Self occupied and Let out property covers only 2 lakh limit of tax deduction benefit

• Do note that for construction home one has to total the amount and calculate it by dividing the five years equally. However, per annum 2-lakh amount will be claimed

 

 

• The Section 80EEA is a new Section that replaces the Section 80EE of IT. 80EEA covers the deduction for interest paid on home loan for affordable housing (Housing for all). It is mainly for the first time homebuyers.

• The rule is that the value should be below 45 lakhs and it should be affordable and loan amount should be below 35 lakhs

• Apart from 80C deduction amount of rupees 1.5 lakh one can claim additional tax deduction amount of 1.5 lakh

• Previously, under Section 24 you can save up to Rs 2 lakh tax exemption on Intrest for a home loan, now the introduction of section 80EEA, you can get total exemption of Rs 2 Lakhs plus 1.5 Lakhs. This means Total amount of 3.5 Lakhs

• Before 2019, the deduction amount was 50,000 rupees

 

 

• For purchase and construction of home, one can take home loan to get tax deduction benefit

• But for renovation and other decorative use of his or her house one cannot avail the tax deduction benefit

• If you invested in home and the construction of your home, which you have taken through builder, completes after 5 years then you cannot get tax deduction benefit

• One can take the benefit of tax only after he or she gets the possession or house certificate

• One can keep two self-occupied copy from the year 2019. Before 2019, only one home was allowed that too where you stay. But now the scenario is different

• Previously one had to show the income from property (Rent) as well, but two self occupied property is allowed under Income Tax Act 1961 and you don’t have to show the income from rent

• Interest amount can be shown on loss from property

• Interest paid on the outstanding amount of home loan is not treated as the tax deduction

• No tax deduction for the commission paid for buying home or managing home loan

• The most interesting part of all is that joint home loan or joint property owners can also avail different tax deduction limits and benefits

• By dividing the home loan amount both can jointly pay the interest and avail the tax benefits separately

 

Just follow the steps and avail the tax benefits under different Income Tax Section. Mainly, the first time homebuyers can avail good benefit under Section 80EEA which introduced last year in the budget. Do follow the advise of your personal Income Tax planner before investing in any tax deduction benefits schemes and products.