Did you know that you can get several tax benefits on your home loan? A home loan sometimes turns out profitable in more ways than one. A home loan comes with several tax benefits that you can avail of. These are listed below:
- Tax Deductions under Section 80C- You are eligible to get deductions under Section 80C of the Income Tax Act, on the principal amount repaid on your home loan. You can get a maximum deduction of Rs.1,50,000 under this section. You can also get deductions on the payment for stamp duty and registration fees under this section. However, these tax benefits will only be considered once construction is finished for any project and you have received possession.
- Tax Deductions under Section 24: The maximum deduction that you can get on the interest that you repay annually on your home loan is Rs.2,00,000. This deduction can be availed under Section 24 of a self-occupied property. In case the property is not self-occupied but rented out, the entire interest paid will be considered as deduction and the rent received will be considered as the income. In case the interest paid by the individual exceeds the rent, it can be set-off as a loss from house/property and can be deducted from the next income whenever it becomes taxable.
- Pre-Construction Interest- In case of any renewal/repair/reconstruction, there is no tax deduction allowed for interest that is paid prior to the completion of the property. In case of construction/purchase, the interest amount paid before the completion of construction will be taken as a tax deduction in 5 equal installments for the next five financial years.
- Deductions for First Time Homebuyers- Section 80EE provides an extra tax benefit of Rs.50,000 to first time homebuyers over and above the limit of Rs.1,50,000 under Section 80C and Rs.2,00,000 under Section 24. However, this deduction can only be availed in case the property value is less than Rs.50 lakh and the loan amount is less than Rs.35 lakh. Also, the home loan should have been sanctioned after the 1st of April, 2016.
You can claim your tax benefits by providing the interest certificate from the bank and the loan account statement, which clearly shows the interest and principal repaid along with the prepayment of the principal amount if any. Many people are investing wisely in buying their own homes and are getting good tax benefits accordingly.