Tax benefits to avail when taking a home loan
Posted on: 25/Jan/2018 11:45:09 AM
In the process of buying a house, we tend to overlook the importance of tax benefits. Did you know there were tax benefits on home loans? Here are a few ways you can gain tax benefits on a home loan.
When you take a Home Loan, you have to repay the loan through EMIs. You claim a deduction on the interest repaid under Section 24 of the Income Tax Act. If you live in the property, you can claim a maximum deduction of up to Rs.2 lakh per year for interest paid. If however, if you do not occupy the house, there is no upper limit on the exemption you can claim for interest paid.
It is also possible to avail a tax deduction on the principal portion of the EMI. This is applicable under section 80C of the Income Tax Act. Every year, you can claim a deduction of Rs 1.5 lakh under this section.
First-time home buyers have more benefits to claim. Under Section 80EE of the Income Tax Act, you can claim a deduction on interest paid on the home loan.
When you buy a house, stamp duty and registration charges are inevitable. But you can claim tax benefits on these expenses too. Under Section 80C, a deduction of up to Rs.1.5 lakh is allowed on such payments. Remember, you can claim deductions only in the year that you pay such charges.
You can claim a deduction on interest payments. But the caveat here is that you can do so only from the year in which the construction of the house is complete. However, you can start claiming pre-construction interest from the same year your house is built. According to the India tax law, you can claim the deduction in five equal installments. The pre-construction tax benefits are capped at Rs.2 lakh a year though.
