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Everything you need to know about saving tax when you take a home loan

  • Highlights

  • Use Section 24 for tax benefit on interest

  • Use Section 80C for tax deduction on principal

  • Use Section 80EE for first home purchase

  • Understand all criteria before claiming deductions

Your home loan does not only help you fund your home purchase, but it also gives you additional benefits. Firstly, if you choose a lender like Bajaj Finserv you will be able to secure a speedy sanction with a long repayment tenor. With Bajaj Finserv, you will get low interest rates on Home Loans along with exciting features such as a property dossier, 3 EMI holiday, and a low-interest top-up loan. Secondly, you can also reduce your taxable income when you take a home loan. So, understand these tax rules to use your home loan to its fullest.

Various sections of the Income Tax Act that offer deductions

Home Loan Tax Benefit Under Section 24:

You can claim home loan tax benefit on the amount that you pay towards the interest of your home loan under this section. The maximum claim limit under Section 24 is Rs.2 lakh if your property is self-occupied and completed within 5 years. If not, the limit drops to Rs.30,000. If you don’t stay in the property, then there is no limit on the amount that you can claim.

Home Loan Tax Benefit Under Section 80C: 

You can claim up to Rs.1.5 lakh on the principal amount of your home loan under this section. However, if you sell the property within 5 years, the tax benefit will be reversed.

Additional Read: Your Guide to Getting Better Home Loan Interest Rate

Home Loan Tax Benefit Under Section 80EE:

This section is an additional tax saving benefit for first time homebuyers. It stipulates that if you are buying a home for the first time, you can claim Rs.50,000 additionally against your interest payment, over and above benefits accrued as per Section 24 and Section 80C.

Six Things to Remember Before Taking a Home Loan

Keep these pointers in mind so that you can claim tax deductions with ease

Do remember that Section 24 allows you to claim tax benefits on interest if the property is under construction, if you have taken a loan to buy or construct it. You can claim a deduction on the amount that you have paid before completion of construction or purchase, starting from the year when construction is over, in 5 equal instalments, over the course of 5 years.

Additional Read: Benefits First-Time Home Buyers Can Experience With RERA In Action

Also, if you wish to claim tax deductions jointly, it is essential that both individual’s names are co-owners (for the property) and co-borrowers (for the loan). Then, both you and your co-applicant can claim tax deductions separately, up to the full amount. It is essential to remember that you will only be able to claim as per your ownership share with regards to the property. So, if your property ownership is 40% while your spouse’s is 60%, your tax deduction will be calculated on this basis.
So, when you take a home loan, ensure that you make the most of the relevant tax benefits and give your savings a boost.

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