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Have you claimed these home loan tax benefits yet?

By 27/12/2019Posts

For many, a dream is to buy and own a home. There is meticulous planning and saving to achieve this goal. One of the many things you need to consider is your home loan. However, applying for a home loan brings you one step closer to realizing your dream, which also comes with multiple tax benefits that you can claim. Considering your home loan can be a huge amount, it is important to be aware of these home loan tax benefits because you will be able to save a lot of money. Read on to familiarize yourself with these important home loan tax benefits.

Benefit on payment of interest

You can apply for a home loan for the purchase or construction of a new home. In this case, construction must be completed within five years from the end of the borrowing financial year. The EMI of your Housing Loan consists of two parts – principal repayment and interest repayment. Interest amount can be claimed as a deduction from your income up to a maximum of Rs 2 lakh as per Section 24 of the Income Tax Act of India.

If your property is self-occupied and construction is completed within five years, you can claim a home loan tax benefit, i.e up to Rs 2 lakh. However, if the construction time exceeds five years, the deductible amount will drop to Rs 30,000. On the other hand, if you are renting a property, there is no limit on how much you can claim as a home loan tax benefit, regardless of the status of the property being completed.

Benefit on payment of interest during the pre-construction period

If you have purchased property that is still under construction and you start paying EMIs on your home loan, your eligibility to claim housing tax benefits will only begin when the construction is completed. Now you can assume that you will not receive home loan tax benefits in the period between borrowing and completing construction. Let’s take a closer look, though. There is a provision in the Indian Income Tax Act under which you can claim deductions for such interest. Known as “pre-construction interest,” you are permitted to make deductions in five equal installments from the year you purchased the property or the year the construction was completed. Here, the maximum qualification is limited to Rs 2 lakh. You can also read our blog about what pre-launch means for more information.

Benefit on payment of principal

Section 80C of the Income Tax Act allows you to exempt a home loan tax benefit of Rs 1.5 lakh. This deduction is only available on the full structure of the property you have purchased. However, this benefit can be reversed if you sell your home within five years of the acquisition. Your claimed amount will be added back to your bank account in the same year you sold it. Section 80C gives homeowners the opportunity to claim deductions for amounts paid for various taxes and duties. This is the case regardless of whether you have taken out a home loan or not. However, you can claim that the exemption amount is in the range of Rs 1.5 lakh and can be claimed only in the same year in which these expenses are made.

Benefit for first time home buyers

First time homebuyers can avail multiple home loan tax benefits of up to Rs.50,000 under Section 80E. This is beyond the exceptions you can claim for principal and interest under sections 80C and 24. However, the value of your property should be less than Rs 50 lakh and the total home loan value should be less than Rs 35 lakh. In addition, the homeowner owns only one property and not multiple.

Benefit for co-borrowers and joint owners

For more home loan tax purposes, you can apply for a joint home loan with your spouse, relative or friend. In such cases, you can claim deductions up to Rs 1.5 lakh on principal and Rs 2 lakh on interest. To claim these deductions, both co-owners must be co-owners of the property. So if you are considering a home loan, be sure to read the various financing options available to you on these home loan tax benefits so that you can maximize your savings. Once you have your finances sorted, go to Sankar Infra Projects Pvt Ltd., to find your dream home.


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