What You Need to Know About Home Loan Tax Benefits
Buying a home is not only a significant financial milestone but also an opportunity to enjoy various tax benefits. Home loan tax benefits can help you save money while achieving your dream of homeownership. In this article, we’ll explore what you need to know about these benefits and how they can positively impact your financial situation.
Section 24(b) – Interest Deduction
One of the most significant tax benefits for home loan borrowers is the deduction on the interest paid. Under Section 24(b) of the Income Tax Act, homeowners can claim deductions on the interest paid on their home loan. Here’s what you need to know:
• Self-Occupied Property: If you live in the property you’ve purchased with the home loan, you can claim a maximum deduction of up to ₹2 lakh per year on the interest paid.
• Let-Out Property: If you’ve taken a home loan for a property that is let out, there is no upper limit on the interest deduction. You can claim the entire interest amount as a deduction.
• Under Construction Property: For properties under construction, you can claim the interest paid during the construction period in five equal instalments starting from the year of possession.
Section 80C – Principal Repayment
Section 80C of the Income Tax Act allows you to claim deductions on the principal repayment of your home loan. Here’s what you need to know:
• You can claim a deduction of up to ₹1.5 lakh per year on the principal amount repaid on your home loan. This includes any payments made towards the purchase or construction of the property.
• These deductions can be claimed on both self-occupied and let-out properties.
Section 80EEA – Affordable Housing
In 2019, the government introduced Section 80EEA to provide additional deductions for homebuyers of affordable housing. Here’s what you need to know:
• You can claim an additional deduction of up to ₹1.5 lakh per year on the interest paid on loans taken for the purchase of an affordable home (priced up to ₹45 lakh).
• To be eligible for this deduction, you must not own any other residential property on the date of the sanction of the loan.
Joint Home Loans and Co-Applicants
If you’ve taken a joint home loan with a family member, each co-applicant can claim deductions individually. This means that both you and your co-applicant can avail the tax benefits mentioned above, effectively doubling the potential savings.
Pre-Construction Interest and Post-Construction Interest
Interest paid on the home loan during the pre-construction period can be claimed as a deduction in five equal instalments starting from the year of possession. Post-construction interest can be claimed fully under Section 24(b) if you live in the property, while there is no limit for interest on let-out properties.
Understanding home loan tax benefits can help you save a substantial amount of money while achieving your dream of homeownership. It’s essential to stay updated on the latest tax laws and consult with a financial advisor or tax expert to make the most of these deductions while ensuring compliance with tax regulations. By leveraging these tax benefits, you can make your home purchase not only a place to live but also a smart financial investment.