What To Know About Tax Benefits On A Housing Loan?

Inarguably, one of the biggest investments that the majority of people make in their lives is buying a dream home. No matter how much money one keeps aside in their savings accounts per month, it might not be enough for purchasing a sizeable, plush, and exquisite apartment. Also, using up the total sum of money you have saved for years will not be a sensible move. Hence, it’s advisable to avail house loan.

Buying or building a new residence on a housing loan can help you enjoy different tax benefits. These can significantly cut down the tax you will have to pay at the end of every financial year. The Central Government has always encouraged citizens to opt for a house loan. Under section 80C, it is eligible for a tax deduction.

Keep reading to gain a sound understanding of various tax benefits and as well as the additional ones you can get on making timely payments of EMIs for a loan you avail for purchasing your dream home. Those who have an existing house loan or obtained one lately receive tax benefits on the equated monthly instalments they pay. 

Even in the ongoing financial year, borrowers have the freedom to choose either the old tax regime or the new tax regime. Opting for the old one can help you claim tax deductions under various sections such as section 80C and 80D, aside from tax exemptions like HRA. On the other hand, when you choose the new one, you can cut down on the tax rate.

Let’s find out the multiple tax benefits you can get on a home loan you obtain from a lender.

Tax Deduction on Principal Repayment Amount

Always keep in mind that the EMI a borrower pays consists of two main components. One is the principal repayment, and the other one is the interest payment. Under section 80C of the Income Tax Act, borrowers can claim the principal repayment amount deduction for a self-occupied home. You can claim the same thing even for a house that’s empty or where your other family members are residing.

If you buy two apartments on house loans, you automatically qualify for claiming a deduction on the principal repayment on both loans. The maximum amount is 1.5 lakh rupees. Under section 80C, you can claim a deduction even if you own a let-out property. To receive approval for section 80C deduction, make sure you claim for the registration amount and stamp duty charges you pay. 

Tax Benefit on the Interest Paid on a House Loan

As a taxpayer, you have the complete freedom to claim a deduction on the amount you pay as house loan interest. Under section 24, a borrower can claim a tax deduction on the interest paid on the loan they avail of from a loan provider. Make sure that you choose a trusted lender that allows you to apply for home loan online. 

However, you can’t claim more than 2 lakh rupees deduction for a self-occupied home in a specific financial year. Do not forget that if the amount of interest you pay exceeds Rs. 2 lakh, neither will it be carried forward nor adjusted against income heads like monthly remuneration and capital profits.

Under Section 80EE Additional Deduction

If you are one of those who have borrowed home loans in the 2016-17 financial year, you can enjoy this particular additional tax deduction. Aside from the deduction of 2 lakh rupees on the interest paid, you can also claim and qualify for Rs. 50,000 extra deductions under section 80EE. 

However, to avail of this tax benefit, meeting certain criteria is essential. You have to ensure that the market price of the house you want to purchase is 50 lakh rupees and the loan amount you obtain is not more than Rs. 35 lakhs. Your loan was approved between April 1, 2016, and March 31, 2017. The deduction is applicable if the borrower is the first-time owner of a residential property.

Under Section 80EEA Additional Deduction on an Inexpensive Home

Claiming an extra deduction on the amount of interest you pay is possible. However, you can’t claim over Rs. 1.5 lakhs deduction. Under section 80EEA, you can reap this particular house loan benefit. But, it’s a must to meet the eligibility requirements. Ensure that the stamp price of your new property is Rs. 45 lakhs and the loan availed between April 1, 2019, and March 31, 2020. Also, make sure that you were the first-time residential property buyer on the date when the loan was sanctioned.

Conclusion

Aside from the aforementioned types of tax benefits on house loans that you can reap, you can also claim a deduction if you create a joint home loan account. You need not experience any hassle if you choose Hero Housing Finance Ltd. as your house loan provider. HHFL provides you with the facility to apply online for a low-interest loan to buy a brand new apartment.