A home loan offers more than just an opportunity to reside in your dream home; it also provides tax rebates and other benefits. While you may be planning on starting mutual funds and FDs, one of the best tax saving investments is buying a home. Alongside various exemptions on the principal you have borrowed and the interest applicable on your loan, certain lenders also give you added advantages that make repayment easier on your pocket.
Here’s a look at how to save tax on your home loan:
Section 80C of the Indian IT Act gives you tax deductions on the principal amount that you borrow as your home loan. Applicable to both first-time homeowners as well as those buying their second home, you can claim deduction up to Rs. 1.5 lakh for the latter and Rs. 5 lakh for the former under this section. However, keep in mind that these tax savings are only applicable if your home loan is for ready-to-move-in properties and when you retain ownership for at least 5 years since the date of possession.
Section 24 of the Indian IT Act gives you tax deductions on the interest you pay on your home loan. You can claim up to Rs. 2 lakh on your home loan interest payment if your home is ready or constructed within 5 years. If the construction crosses 5 years, you can claim Rs. 30,000 as deduction. In case you are taking a home loan to buy your second home, you can avail this benefit if the property is already constructed or if the construction is complete in 3 years. In case you are buying a home for renting it out, there is no limit on the tax deductions you can enjoy without any limit on the time taken for construction.
Section 80EE allows for additional tax benefits to first-time homeowners whose home value if less than Rs. 50 lakh and home loan amount is below Rs. 35 lakh. You can claim a tax exemption of up to Rs. 50,000 on your home loan interest amount in one financial year.
Here’s a look at other ways you can make repaying your home loan more affordable:
- Select a lender who offers you a nominal interest on your home loan such as Bajaj Finserv
- Prepay your home loan without paying any charges to decrease the principal amount and reduce your EMIs
- Choose a lender who offers you a top-up loan to meet your other financial needs with ease
- Choose a Flexi Hybrid Home Loan to reduce your EMIs for the first four years by paying only the interest component
- Choose a lender who gives you a 3-EMI holiday
- Pick a home loan of a long tenor to enjoy lower EMIs
By making the most of tax deductions on your home loan and taking advantage of other ways to ease your repayment, buying a home is one of the most beneficial tax saving schemes. So, plan your finances and begin your journey towards becoming a homeowner today!
While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent inaccuracies or typographical errors or delays in updating the information. The material contained in this site, and on associated web pages, is for reference and general information purpose and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Subscribers and users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. In case any inconsistencies observed, please click on reach us.
*Terms and conditions apply