The Government of India has taken numerous steps to ensure every family has a house over their head and has already managed to ensure completion of 15% of the 54.95 Lakh approvals. This includes numerous tax benefits in case of a home loan, thereby making it far easier for families to actually opt for it.
Home loan tax benefits are the foremost of innovative steps taken up by the government along with other region-based schemes that even provide subsidized housing and its likes. It is imperative that any individual interested in applying for a home loan should have an in-depth understanding of all tax benefits that are up for grabs.
Numerous NBFCs have loans on offer and with tax exemptions; numerous individuals have already begun availing them. Taxes form a huge expense, especially in the event of a home loan since the amount of finance involved is in itself immense. The following compiles everything one needs to know about saving taxes while taking a home loan.
- Deduction on Principal: Under Article 80C, the government has created a provision for tax exemption on the principal amount in the event of an individual availing home loan. However, individuals availing this benefit cannot sell the property within the next 5 years. Important to note, this deduction can be claimed up to Rs. 1.5 Lakh.
- Deduction on Interest: Deduction on home loan rates has been introduced too. Two different sections of law provide home loan tax benefits based on their individual criteria.
24 (b)- In case of home loans for purchase or construction of a house, this benefit exempts taxes on interest up to Rs. 2 Lakh. Amongst its criteria, the construction must be over within 5 years from the date of approval of the loan.
In the case of renovation with that home loan, a tax benefit up to Rs. 30,000 is provided to the individuals.
80EEA- Under this section of home loan tax benefits, buyers are entitled to additional tax benefits up to an amount of Rs. 1.5 Lakh. This is specifically for individuals who do not own any brick or mortar house. Also, this is valid until March of 2020.
- Deduction on stamp duty and registration: A deduction on both stamp duty and registration is also on offer under Article 80C. However, this comes under the overall limit of Rs. 1.5 Lakh. Therefore, the calculation of this is generally contained within that of the exemption made on the principal amount.
- Deduction for joint home loans: In case two individuals jointly availing a home loan, both are eligible to avail the tax benefits. This includes both the deductions under 80C and 24(b). This tax benefit of joint home loans is extremely helpful especially for middle class working couples who are trying to acquire a property in metropolitan areas. With these core areas being extremely pricey, the double benefits immensely reduce the burden on their finances.
While taxes on home loans are immense owing to the huge amount of principle that is involved in the transaction; its calculation, though daunting, is not too difficult. Any aspiring buyer can simply avail a home loan tax benefit calculator and estimate the tax amount that they are liable to pay.
The Government of India has primarily introduced home loan tax benefits for two groups of individuals. They have categorized it on the basis of income, thereby naming them Low Income Group (LIG) and Middle Income Group (MIG). The latter has been further divided into two categories I and II. These categories have individual criteria and benefits. If you are a prospective individual about to avail a home loan, make sure you have a complete idea before you make the long-term financial commitment.
