In India, most people make their dream of purchasing their first house come true with the help of home loans. But, did you know you could save on tax during repayment of the loan? Yes, you read that right. You can claim income tax benefit on home loan under sections 24, 80C and 80EE. The tax benefits can be claimed on the payment of your principal amount as well as the home loan interest rate.
Let us tell you the tax benefits you can avail under the sections mentioned above:
Under this section, you can claim tax benefits up to Rs. 2 lakhs on repayment of interest on housing loan.
P.S: This is applicable only for self-occupied property.
Under this section, you can claim tax benefits of up to Rs. 1.5 lakhs on repayment of the principal amount of your home loan.
Under this section, you can claim an extra Rs. 50,000 as a tax benefit on the interest repayment.
P.S: This is applicable if you are a first-time home buyer.
So, what are the conditions that you need to keep in mind while claiming tax benefits?
You can claim tax benefits on your home loan in India only if the property you have purchased is ready to be occupied, i.e. not under construction. Sometimes, constructions get delayed. Hence, the rules have been bent a little so you can still claim benefits if such a situation persists. E.g., You can get a tax benefit if the construction of the property you have purchased ends within five years of you taking the loan. Earlier this was only three years.
Under Section 24, you can claim interest on housing loan for the under-construction period. You can do this in five equal instalments for five years which starts from the year construction ends. Suppose the construction or buying of a property is not completed within five years then, you can claim a maximum benefit of Rs. 30,000 only.
What conditions do you need to keep in mind for claiming tax benefits on joint home loans?
To enjoy tax benefits on joint home loans, the second party has to be a co-owner as well as a co-borrower. Both holders can separately claim tax benefits on their joint home loan. They can do this when their individual share of the property is clearly defined. Also, the ratio of tax benefit is the same as the ratio of the property share. Also Read: How to claim tax benefits on joint home loans?
What all should you consider before tax planning?
In your financial and tax planning, you should consider a few things like; whether or not you can improve your credit score, the interest rate on the home loan that you would have to pay, and whether or not you’re eligible for benefits under the PMAY scheme.
Choose your home loan and housing finance company carefully, and while you apply for a home loan online, check how to calculate income tax on our tax saving calculator here and plan your tax savings accordingly!