With the rise in the real estate sector, the percentage of home loan applicants has also increased to 16% in 2018. These home credits also allow the applicants to enjoy tax benefits under several sections of the income tax act.
Such income tax benefit on home loan can be claimed at the end of each year at the time of income tax filing. Additionally, these tax benefits of home loan are also available when you fund the purchase of a second home.
Given below are the tax benefits that you can avail on a home loan, such as:
Section 24(b)
Section 24(b) of the Income Tax Act allows you to claim deductions against the amount paid towards the housing loan interest portion of the EMI. You can claim deductions of up to Rs. 2 Lakh.
Under this section, you can claim deductions also for availing home loans to buy a second property. Earlier the interest amount in such cases was entirely deductible. With the implementation of the Income Tax Act, you can enjoy a deduction of up to Rs. 2 Lakh towards the interest amount.
Section 80C
Home loans also offer you tax savings and other advantages under Section 80C. You can claim deductions of up to Rs. 1.5 Lakh for the amount payable against the principal portion of your EMI.
To avail income tax benefit on home loan under this section, the property should not be sold within five years from the year of possession. If sold, the deductions claimed will be added to the income in the year in which the property was sold.
Under this section, you can also claim deductions for the amount paid against stamp duty and registration fee.
Besides, the exemptions are allowed for first time home buyers. You cannot claim income tax benefits under Section 80C for home loans availed to purchase a second house.
Section 80EEA
Section 80EEA was introduced in the Budget 2019 as an additional tax benefit to increase affordable housing for home loan borrowers. Under this section, you can claim tax benefits of up to Rs. 1.5 Lakh on the interest paid.
To claim this benefit, the stamp value of your property should be within Rs. 45 Lakh. Your loan must also be approved and sanctioned between 1st April 2019 and 31st March 2020.
Process to claim tax deductions
You can claim tax saving on home loan conveniently by following the below-mentioned steps –
Step 1. Arrange the required documents
You are required to provide the following documents while you claim tax saving when you take a home loan –
- Documents to prove ownership of your property
- Details of the borrower
- Documents to prove that you have paid your municipal taxes
- Date of purchase and completion of construction of your property
- Certificate from your lender stating the principal and interest amount
Step 2. Submit the documents to your employer
In case you are a salaried employee, submit the above mentioned documents to your employer to adjust your TDS accordingly. In case you are a self-employed individual, you are required to use these documents to determine your Advance Tax Liability for every quarter.
To enjoy such income tax benefit on home loan, you can avail financing from various NBFCs. There are several lending institutions that offers Home Loan at competitive interest rates and minimal documents. They also provide online account access, no pre-payment and foreclosure charges and other lucrative benefits. Lastly, the income tax benefits can be claimed for both self-occupied and rental property. You are required to calculate the income from your rented property and estimate your deductions under home loan. After you have calculated your gross income, you can use a home loan tax benefit calculator to estimate your deductions and taxable amount.
