Important Tips to Get Tax Deductions on Your Housing Loan

The Government of India’s aim to lift the real estate sector in the country has resulted in implementing policies like Pradhan Mantri Awas Yojana (2015) which aims to provide ‘housing for all by 2022’ through affordable housing loans. Additionally, the formation of RERA (Real Estate Regulatory Authority) and the implementation of the Real Estate (Regulation and Development) Act in 2016 brought the much-needed transparency to this sector. 

In addition to this, RBI’s reduction of repo rate to 4.40% has presented the aspiring homeowners an opportunity to avail home loans with additional benefits.

However, aspiring homeowners should be aware of the tax benefits on home loan they can avail on their loans before applying.

In India, homeowners can claim tax exemptions on home loans in two categories. They are –

Interest paid: Borrowers can claim tax benefits on their home loan interests which they are liable to pay throughout a year.

Principal amount: Borrowers can enjoy home loan tax benefits on the principal amount under Section 80C of the IT Act.

Homeowners can enjoy these above-mentioned tax benefits under Sections, 80C, 24(b), and 80EE.

Under Section 80C

This section allows customers to relish tax exemptions up to Rs.1.5 lakh. However, to claim benefits under this Section, borrowers must remember the following points –

  • The property must be constructed or purchased within 5 years of the loan application.
  • Borrowers cannot sell their property within 5 years of availing the loan. However, in case they sell it the tax exempted will be reversed and added to their tax payment of that year.
  • Under this Section, borrowers can save tax only on the principal amount of their loan.

Apart from that, under this Section, borrowers can claim tax benefits on stamp duties and registration fees they have already paid for the property.

Under Section 24(b)

Section 24(b) divides housing loan benefits into two categories, pre-construction period, and post-construction period.

  • Pre-construction period: Homeowners can claim tax benefits for under-construction properties under this Section. However, this period cannot extend for more than 5 years. Borrowers can claim their tax exemption in 5 equal installments.
  • Post-construction period: In case of entirely constructed properties, borrowers can relish benefits of up to Rs.2 lakh. In the case of let-out properties, there is no upper limit to this tax exemption.

Homeowners should note that they can relish the home loan tax exemption up to Rs.2 lakh.

Also Read: What is ITR Form 16? All You Need to Know About It

Under Section 80EEA

This Section allows borrowers to avail tax benefits on affordable housing schemes, preferably for first-time home buyers. Other benefits of this scheme include –

  • This Section enables borrowers to claim additional benefits of Rs.1.5 lakh apart from the Section 80C benefits.
  • Formerly, borrowers were allowed a tax benefit of Rs.2 lakh on their home loan interest. However, under this new Section, they can enjoy an additional home loan tax benefit of Rs.1.5 lakh. 

Homebuyers should note that this Section has replaced the previous Section 80EE. However, borrowers have to get their loan application approved between 1st April 2019 and 31st March 2021.

On joint home loans

Homeowners can avail additional tax benefits if they apply for a joint home loan. Both co-applicant and co-owner can enjoy the tax benefit of Rs.2 lakh on interest and Rs.1.5 lakh on the principal amount individually, respectively.

Thus, homebuyers looking to avail of a home loan can get in touch with reputed HFC Bajaj Finserv. The company offers an attractive interest rate and flexible tenor on their home loans. Check your housing loan eligibility to avail a home loan from them with various benefits.

Home loans impose a significant debt on the borrowers. Hence, they should talk to lenders to get a better understanding and gather more information on home loans. Additionally, borrowers should also know about home loan tax benefits before applying.

Aryan Singh

Aryan Singh is an experienced Financial Consultant and Tech Reviewer who has 6+ years of experience in the field of finance, business, and technology. He is very passionate to write about Finance, Business, Technology, Gadgets, Digital Marketing, Guest Posting, Fashion, Lifestyle, etc.

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