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 Home Loan tax exemption
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: Save Tax on your Home Loan
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.
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 installments, over the course of 5 years.
Additional Read: RERA Benefits for First Time Home Buyers
Deduction for Joint Home Loan
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.
Deduction in respect of interest paid towards home loan during pre-construction period
Income tax benefits on home loan interest paid are not available during the pre-construction or under construction period of a property. You will not be able to make the claims during this phase even though you are paying your loan EMIs. However, you will be able to make the claims once the construction of your property is over. In such cases, the deductions will be available in 5 equal installments over a 5-year period. The exemptions will be up to Rs. 2 Lakh under Section 24 (b).
However, you will be able to claim income tax benefits up to Rs. 1.5 Lakh on principal repayment of home loan under Section 80C during the pre-construction phase. 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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