Introduction
For numerous individuals, owning a house is a cherished aspiration. To promote property investment, the Indian government offers several tax advantages on home loans according to the Income Tax Act of 1961. By taking advantage of these tax benefits, individuals have the opportunity to save a considerable portion of their tax payments. When it comes to home loans, there are two components to consider: the repayment of the principal amount and the payment of interest. The good news is that you can benefit from tax deductions in both of these categories. Under Section 80C of the Income Tax Act, you can avail tax deductions while income tax e filing for the principal repayment, whereas under Section 24(b), you can claim deductions for the interest payments.
Tax Benefits on Home Loans
India offers numerous tax benefits for individuals who have taken out home loans. These are given below:
Section 24
As per Section 24 of the Income Tax Act, individuals have the opportunity to avail a tax deduction for the interest paid on their housing loan. The maximum limit for this deduction is Rs. 2,00,000. Upon the successful completion of the house construction within a period of five years, you will become eligible to claim this deduction. Nevertheless, in the event that the construction exceeds the specified timeframe, your entitlement will be limited to a maximum of Rs. 30,000. In order to claim the deduction, it is necessary for the loan to be utilized exclusively for the purpose of purchasing or constructing a completely new residence. When you obtain a loan to renovate or repair your existing home, you are eligible to claim a deduction of up to Rs. 30,000.
Section 80C
Section 80C of the esteemed Income Tax Act presents a remarkable opportunity for individuals to optimize their financial standing by availing deductions on specific investments and expenses. The principal amount of a home loan is eligible for tax benefits under Section 80C of the Income Tax Act. In accordance with the provisions outlined in this particular section, taxpayers have the opportunity to claim a deduction on their income for the payments made towards the principal portion of their mortgage. When it comes to tax deductions under Section 80C, individuals have the opportunity to claim a substantial amount of up to Rs. 1.50 lakh during the income tax e-filing process. The deduction can only be claimed if the loan is utilized exclusively for the purpose of purchasing or constructing a new residence. Unfortunately, under Section 80C of the Income Tax Act, individuals are not eligible to claim any deductions if the loan is utilized for the purpose of renovating or repairing an already existing residential property.
Section 80EE/80EEA
Section 80EE and Section 80EEA are two noteworthy provisions within the Indian Income Tax Act that offer advantageous perks to individuals who have availed home loans. The following sections are designed to promote and advocate for the benefits of owning a home.
One can take advantage of the provisions outlined in Section 80EE/80EEA of the Income Tax Act to avail tax deductions on the interest paid towards their housing loan. In this particular section, individuals have the right to request tax deductions of up to a maximum of Rs.1.50 lakh. You can only claim these tax exemptions on home loans if you are purchasing houses with a stamped value of up to Rs. 45 lakh. Homeowners are eligible to receive benefits on loans obtained until March 31.
Joint Home Loan
When a home loan is taken jointly, each borrower has the opportunity to individually claim deductions on the interest paid on the loan, up to Rs. 2 lakh, as per Section 24(b). Additionally, they can also claim a tax deduction on the principal repayment, up to Rs.1.5 lakh, under Section 80C during the income tax e-filing process.
Conclusion
To sum up, while home loans may come with a significant cost, the inclusion of several tax advantages can assist individuals in saving money annually. Individuals can save a substantial amount of their tax payments by taking advantage of the tax benefits provided under the Income Tax Act of 1961. To maximize the advantages, it is crucial to have a comprehensive understanding of the various tax benefits associated with home loans.
Also Read: 6 Types Of Personal Loans You Can Apply For
