Relation between loan amount and tax deduction
Housing loans are helpful in many ways. They help in improving the credit score, providing funds to invest more, growth of the borrower, and tax benefits. A home buyer can get many benefits from a home loan, From the increased investing ability to tax deductions as per section 24 and section 80C of the Income Tax Act. The home loan amount affects the tax deduction but the deductions cannot exceed Rs. 2 lacs. Relation between loan amount and tax deduction
Understanding Home Loan
A home loan is a large financial assistance provided by a bank or a housing finance company. It aids in the purchase of the best property you can afford. Depending on loan eligibility and policies, Lenders can pay between 75 and 90 percent of the total price of the residential property you want to purchase. The lenders charge an interest rate over the home loan amount which is to be repaid by the borrower along with the loan amount. Tax deductions for the payment of income tax are provided to the borrower by the Government of India. The tax deduction is provided for the repayment of the principal as well as the interest on the home loan.
Tax deduction for principal repayment
As per Section 80C of the Income Tax Act, a Maximum of Rs 1.5 lacs can be claimed as a tax deduction for the repayment of the principal amount of the home loan.
In order to claim this tax deduction, The concerned property should not be sold within five years of possession. Otherwise, the deduction claimed earlier will be added back to the income of the home buyer in the sale year.
Tax deduction for payment of interest rates
As per Section 24 of the Income Tax Act, a Maximum of Rs 2 lacs can be claimed as a tax deduction for the payment of the interest on the home loan. In the case of a self-occupied home, This amount is Rs 2 lacs max. For a let-out property, There is no upper limit for claiming interest.
Deduction for a joint home loan
In the case of a joint home loan, Each borrower can claim a deduction for home loan interest up to Rs 2 lacs each and principal repayment under Section 80C up to Rs 1.5 lacs each in their tax returns. In order to claim this deduction, they should also be co-owners of the property on which the home loan is being taken.
There are also other loan deduction options. As per Section 80EE, For a loan of Rs 35 lacs or less and the worth of the property should not exceed Rs. 50 lacs. Section 80EE was reintroduced but is valid for loans sanctioned till 31st March 2017. As per Section 80EEA, Home buyers can claim a tax deduction of Rs 1.5 lacs but the stamp value of the concerned property should not exceed Rs 45 lacs. The applicant should also be a first-time home buyer.
If you want to buy a home then a home loan is a very helpful accessory along with the tons of benefits it has to offer. There is no direct relation between the loan amount and tax deduction except in some cases mentioned above.