Home loans are a boon in fulfilling your desire to build a house you always wished for. Now that there is a positive change in home loan interest rates, your desire to own your own home can now turn into a reality.
Buying a house of your own gives you mental satisfaction and also adds up to providing financial security to your family. Many people achieve their dream of owning a house of their own by taking a home loan but not all are aware of home loan tax benefit.
One of the ways of achieving tax benefit on home loan interest is by simply using a home loan tax benefit calculator. It acts as a tax calculator which quantifies the tax benefits you could avail on home loans. To calculate yours, click here – Home Loan Tax Benefit Calculator
Talking about tax benefit on home loan interest, a major change in financial year 2017-18 is, deduction on home loan interest which is now same for both rented and self-occupied property i.e. Rs 2 Lakhs.
Adding to this, another aspect in the financial year 2017-18 is that it aims to confine the loss on house property that can be reduced from ‘other parts of income’ such as ‘salary income’ to Rs 2 lakh only.
Following are the significant tax savings on home loan changes, according to various divisions, as per the financial year 2017-18:
Tax Benefits on first Home or Self Occupied:
Those with self-occupied property, are currently allowed to claim interest paid up to Rs 2 lakh on home loan. This is due to deduction from other parts of income such as salary income or income from any other source only if the construction of the house is completed within 5 years from the end of the financial year in which loan is taken, or else 30,000. Also read – Home Loan Calculator to gain Tax Benefits
Tax Benefits on Rented House:
When it’s about rented house, 30% of the rental income which is like the standard deduction plus municipal tax paid on the house and interest paid on the loan taken for that house are allowed as deductions. After all these deductions, most of the times the rental income zero’s down and is then termed as loss from house property. In the financial year 2017-18, this loss is presently allowed to be set off against other parts of income such as salary without any limit.
In simple terms, the tax payer can now save on his total income tax payable on rental income as well as total income. Call it income tax benefit on home loan.
The tax benefit on rented house remains the same in the case of second home/ additional property and also in the case of where the house is under construction.
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