Home Loans Can Help You Save Tax, Here’s How!

When you take a home loan, you get the house you dreamed of, pay reasonable EMIs to repay said loan and save some money while doing so. There are tax benefits that you can avail on your home loan. This reduces the tax burden on you and also helps manage your cash flow. Given below are a few ways you can claim tax benefits on your home loan.

Deduction For Interest Paid

Section 24 of the Income Tax Act allows you to claim the interest you pay in your monthly EMIs on your home loan as a tax deduction from your total income up to INR 2 lakh. You can avail this deduction only for a property that will be completely constructed within 5 years.

Deduction of Interest Paid During Pre-Construction Period

You can claim the interest being paid in 5 equal instalments to a maximum of INR 2 lakh as a part of home loan tax benefits. This deduction also falls under Section 24 of the Income Tax Act and can be claimed only if the property has been bought before the completion of its construction. You can claim this deduction from the year of the purchase or when the construction is completed. If you have taken a home loan to renovate your existing home, you can claim this tax exemption after the renovation is complete.

Deduction On Principal Amount

When you take a home loan, you are eligible to avail the tax benefits on the principal amount of your loan. This amount cannot be greater than INR 1,50,000. You can avail of this benefit under Section 80C of the Income Tax Act. The property can either be self-occupied or rented out. You can only claim this benefit once the construction of the property is done and you don’t sell it within 5 years. If sold within that period, the benefits will get reversed. You can also claim registration and certain stamp duty charges under this section

Deductions Under Section 80EE and 80EEA

If you are a first-time homebuyer, you can claim an additional deduction up to INR 50,000 under section 80EE of the Income Tax Act. This particular deduction is over and above the INR 2 lakh limit specified above. The value of the property you are buying should be less than INR 50 lakh and your loan amount to be at least INR 35 lakh to avail this benefit. Section 80EEA allows you to claim an additional deduction of INR 1.5 lakhs, provide the price of the property you are buying is below INR 45 lakh.

Benefits On HRA

House Rent Allowance is provided by employers to salaried individuals living in rented accommodations. The Income Tax Act has a provision under Sec 10(13A) that allows you to deduct this amount from your total taxable income. If you are a self-employed professional, you won’t be able to claim this benefit.

A home loan can be a very beneficial thing for you, financially. It makes sure that you have an asset in your name and you save significant amounts of money while repaying the loan. If you are unsure of your eligibility, you can check this from a home loan eligibility calculator.