When it comes to tax saving schemes, both first-time home buyers and investors buying their second home have a lot to gain from purchasing a home. If you are financing your property with a home loan, you get tax benefits on both your home loan principal repayment and interest. Here’s what you need to know about how to save tax on your housing loan.
If you are a first-time buyer
Under Section 80EE of the IT Act, you are eligible to save tax up to Rs.50,000 on your home loan interest payment. You can claim this deduction every year until you completely repay your housing loan, and it does not matter whether your new home is a self-occupied property or whether you have leased it out.
The only factor to keep in mind that this benefit is only applicable if your home loan doesn’t exceed Rs.35 lakh and the cost of your home is below Rs.50 lakh.
If you are buying a property for yourself
Under Section 24 of the IT Act, you are eligible to save tax up to Rs.2 lakh on the interest you pay on your home loan. The only factor to keep in mind is that this deduction is only valid for those homes whose construction is already completed or is completed within 5 years. If your home takes longer than 5 years to be completed, your tax benefit is Rs.30,000.
Under Section 80C, you are eligible to save tax up to Rs.1.5 lakh on the principal amount you have taken as your home loan. However, you can enjoy this deduction once your home construction is complete. One of the factors to keep in mind here is that you will only be able to avail this benefit if you retain ownership of the property for at least 5 years. If you sell your home before this time, then the benefit you have received on this principal repayment will be reversed.
If you are buying a property as an investment
Under Section 24, you are eligible to save tax on the interest payment of your home loan to the full amount if you are not occupying it yourself. This tax benefit is applicable to you without any restriction on the construction timeline of your chosen home. The only factor you should keep in mind is that the interest on your housing finance will be deducted from the rent you receive from your home.
If this number is in the negative or when your rent is below the interest payment on your home loan, you can term it as a loss from home property and set off this amount against other income to the maximum of Rs.2 lakh.
Under Section 80C, you can enjoy the same benefit of a tax deduction up to Rs.1.5 lakh on the principal repayment of your home loan. However, keep in mind that you need to have possession of your home for at least 5 years.
If you are a joint property holder and co-borrower
As long as your name appears on your property papers as a joint owner of the home and you are a co-borrower of the home loan, you can enjoy all the tax deductions stated above.
Now that you know the extensive tax benefits on financing your home with a home loan, choose your lender with care. Consider taking a home loan from Bajaj Finserv, which increases your repayment convenience by offering you a high loan amount at nominal interest, the provision of an affordable top-up loan and a 3-EMI holiday.
Bajaj Finserv brings you pre-approved offers for personal loans, home loan, business loans and a host of other financial products. Not only does this simplify the process of availing financing, but also helps you save on time. All you have to do is share a few basic details and check out your pre-approved offer.
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