Owning real estate today can be quite an achievement, especially with housing prices on the rise. Despite this, the Indian government is taking several initiatives to encourage people to invest in real estate. One of the initiatives is the Tax Incentive Home Loan.
If you apply for a home loan, it is eligible for tax benefit under Section 80C. It can offer income tax benefits up to Rs. 1.5 lakhs. This will significantly reduce your financial burden in the long run.
In this article, we will tell you more about the various tax benefits of home loans.
What is home loan?
With a home loan, you pay EMIs ( equal monthly installments) for two main parts of the loan:
Principal amount
Interest payment
Home Loan tax relief applies to these parts differently, and the tax relief for these parts falls under different sections of the Income Tax Act.
What are the Different Home Loan Tax Sections?
The three sections of the Income Tax Act that provide for the deduction of Home loans are:
| Section | Component of the Home Loan | Maximum Rebate |
|---|---|---|
| Section 80C | Deduction on principal amount | Rs. 1.5 Lakh |
| Section 24(b) | Deduction on the interest amount | Rs. 2 Lakh |
| Section 80EE | Deduction for first time buyers | Rs. 50,000 |
Section 80C
You can claim up to Rs.1.5 lakhs from your income.
You cannot sell the property for at least five years if you want to claim deduction. If you sell it, the resulting deduction will be added to your income in the year of sale.
You can also claim a registration and stamp duty deduction under section 80C.
Section 24(b)
Under section 24(b), you can claim a mortgage tax deduction up to Rs. 2 Lakh on the interest amount.
This deduction applies only to properties whose construction is completed in less than five years. If it takes more than five years, you can claim only Rs. 30,000.
In case of rental properties, there is no ceiling for interest claim.
Section 80EE
First time home buyers can claim deduction up to RS. 50,000 in each financial year from the interest payable.
With this deduction, the Home Loan amount should not exceed Rs. 35 Lakh and the stamp duty value of the property should not exceed Rs. 45 Lakh.
What are the other home loan tax benefits?
If you take a joint home loan, the individual loan holders can claim a home loan interest deduction of up to Rs.2,000. Besides, they can also claim principal repayment under section 80C up to Rs.1.5 lakh in their tax return.
To claim Home Loan deduction, they must be co-owners of the property. If you wish, any family member or friend can become a co-owner.
If you take out a second Home Loan to buy another home, tax Benefits apply to the interest paid. You can claim the full interest amount. It is better to seek professional advice and make an informed decision before applying for a home loan.
