ITR files… a word that rules the month of July. How many times have you scratched your brains, finding the best option that helps you save your money? Did you know? One of the easiest ways to save tax is with the help of your housing loan.
According to the regulation in the Income Tax Act, 1961, a home loan can also be beneficial in saving taxes. These provisions are included in the latest financial budget. Nirmala Sitharaman, our Union Finance Minister announced 31 March 2024 as the new deadline for deductions on interest payments on all home loans sanctioned before 31 March 2022.
Before opting for a loan, one must be aware of the income tax rebates on home loans to make a wise decision. Here are some ways of availing of these benefits:
The information regarding eligibility in deductions for home loans is mentioned in different sections of the IT Act.
1.Under section 80C of the Income-tax Act, 1961:
According to the act, a significant amount of the EMI can be deducted for self-occupied property, stamp duty and registration fees for buying a home. Even if you have a second home that is rented out or kept vacant, it is considered as self-occupied property. The maximum amount of tax exemption that can be claimed is Rs 1.5 lakhs in a financial year. Even if you have made other investments, the deduction amount will be capped at Rs 1.5 lakhs from your taxable income on principal amount. However this amount will be reversed if the house is sold within 5 years of possession.
2. Section 24(b) of the IT Act:
This act provides a reduction in tax obligation on the interest paid on the loan. This is also applicable on homes that are in the process of being constructed, pre payment charges or any process fees. You can claim the entire interest amount deduction but if you are residing in the house you can claim a deduction amount up to Rs 2 lakhs in a financial year
3. Section 80EE:
A tax exemption is available for first-time home buyers. The home loan purchased should be of Rs 35 lakhs and the price of property should not exceed 50 lakhs. You can claim an additional deduction amount till Rs. 50,000/- with conditions applied. Under the Section 80EEA, availing tax exemption is possible the loan application must be between April 1 2016 to 31 March 2022, if the stamp duty on the house is less than 45 lakhs, you cannot own another residential property from the time loan is sanctioned.
You cannot claim the same deduction amount two times from different sections of the IT Act
4. Joint loans:
In case of this, each co-borrower can avail a tax benefit on interest payment of up to Rs. 2 lakhs. It is very beneficial for income tax savings if the loan is taken on a joint basis. The tax benefits depend on the loan share of the owners, if the partners are paying 40:60 then the tax benefit will align with this ratio. Joint owners can also claim tax deduction on stamp duty and registration charges.
There are various ways in which home loans can reduce your financial burden. Refer to the aforementioned tips for making prudent decisions while purchasing a house. You can also keep a note of these and enhance your financial prowess for future reference.
RGS Realty seeks to build an environment brimming with goodness. We guarantee assurance of quality and customer service of high caliber for a hassle-free home buying experience. With a compelling desire to deliver excellence in the form of real-estate, we are here to Build Good.
Head to https://www.rgsrealty.com/ to know more.