Structuring Home Loans & Tax Exemptions

Tax Benefits on Home Loans

Did you know that you could have multiple home loans at the same time, just like you can purchase multiple properties at the same time? There is no restriction on the number of home loans you can take and it’s a common misconception that there are such restrictions. Not only can persons opt for multiple home loans, but they can also avail and claim tax benefits on all their home loans.

For those who are not familiar with the workings of the financial world, it can be a bit daunting to understand how the system of multiple home loans work. Here’s a simple guide to understanding multiple home loans and how they work:

  1. The first thing that is taken into consideration when you apply for a home loan is your earning capacity and income. You must only apply for multiple home loans if you are sure that your income would be sufficient to repay them all.
  2. The amount you can borrow also depends on the income of the person (or persons, in case of a joint loan)applying for the loan.
  3. You are eligible for tax benefits on home loans for each loan that is sanctioned to you.

Home loans in India bring with them a number of tax benefits. The Income Tax Act has various sections for tax benefits. If you are planning to opt for home finance anytime soon, here’s what they are and what you should know about these benefits:

  1. Section 80C: This section states that you can claim tax benefits of up to Rs 1.5 lakh on repayment of the principal amount of your loan.
  2. Section 24: This section states that you can claim tax benefits of up to Rs 2 lakh on repayment of interest on housing loan. However, this is only applicable for a self-occupied property. If you are renting out your property then there is no maximum limit on the tax benefit amount. So, you can claim the entire interest amount as a tax benefit. You can do this even if the amount exceeds Rs 2 lakh.
  3. Tax Benefit on Home Loans: This section states that if you are a first-time buyer then you can claim an extra Rs 50,000 as tax benefits on the interest repayment.

Now that we are in the middle of March, and the financial year is coming to an end, we are all in a hurry to figure out income tax deductions for the year 2017-18. Your home finance can be an important part of your tax saving calculator. Here’s how you can avail the tax benefits on home loan:

  1. You can only start claiming income tax benefit once the construction of your new property is complete. These tax benefits do not apply to properties that are still under construction.
  2. There is an exception to the rule — You can get a benefit if the construction ends within five years of you taking the loan.If you opt for a joint loan then the second party is liable to enjoy tax benefits by being the co-owner and co-borrower. They can then claim tax benefits on their home loan interest rate separately. They can only do this when their individual share of the property is clearly defined. The ratio of tax benefit is the same as the ratio of the property share.

If you wish to know how much amount are you liable for prior to applying for multiple loans, then you can use our Loan Eligibility Calculator to calculate the same.

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