The fundamentals or basics of these days are not very different from previous ones. If you have a well-paid job, a nice health cover and a home that you can call your own is what is known as a successful life today.
However, if you don’t have the financial capacity to buy a home out of your own money, you can always apply for a home loan.
Other than just providing you with a handsome amount to buy a home, you can also enjoy the tax benefits of a home loan. Hence, if you are planning to buy a home, you should know the income tax benefits of the loan to curtail your burden.
If you don’t know how to calculate tax on your income or filing small business taxes for the first time, you can use the income tax calculator on a lender’s website free to know more.
Here are some benefits of the home loan that can assist you in reducing your taxable income in more than one ways. Have a look:
The Indian Government helps you lessen the income tax burden when you repay the actual borrowed amount or the principal. It comes as per the deduction under Section 80C of the Income Tax Act. As per the current scenario, the deduction under Section 80C is allowed up to Rs.1.5 lakh. The Section 80C also lets you claim the stamp duty and registration duty deductible from the taxable income.
The tax benefits on the home loan under the Section 80C are considered legal only when once the home construction is complete and you have the certificate for it.
Section 24 of the Income Tax Act lets you claim the interest paid towards your home loan up to Rs.2 lakh for self-occupied property. Also, if the property is not yet occupied and if you are living in another place due to your job, even then you can enjoy up to Rs.2 lakh as the deduction amount. If the property is not self-occupied but rented, the earned rent will be treated as income. Hence, the interest paid on it will be claimed under deduction. If your interest paid is greater than the rent, it can be considered as the loss from house property. Therefore, it fits to be treated as the deductible from the taxable income.
You should claim the deduction on a yearly basis when the interest gets accrued. It is also the major difference between Section 24 and deduction under Section 80C. Under Section 80C, the deduction is claimed after the payment of the principal amount.
The Section 80EE was reintroduced in the budget 2016 to give extra benefit of up to Rs.50,000 to the first-time home buyers. This deductible limit is offered over the Rs.1.5 lakh limit of the Section 80C and Section 24’s Rs.2 lakh limit.
You can claim the deductible under the Section 80EE only under some conditions. It is when the value of the property is lesser than Rs.50 lakh, and the availed home loan on it is lower than Rs.35 lakh.
What’s more, here is another thing that you need to consider here is that the home loan should have been sanctioned only after 1st April 2016.
Read Also: Quick Checklist for Income Tax Returns ( ITR ) at a Glance
To claim income tax benefits out of a home loan, you would need to get the Interest Certificate from the bank and a Loan Account Statement. It should clearly mention the amount paid towards interest, principal and principal prepayment if any.
You are aware of the tax benefits of home loan under section 80C, 24 and 80EE that you can claim. It will surely help you lessen the income tax burden easily! All the best!
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