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Today, taking out a home loan has become easier than ever. It is because of flexible tenure, competitive interest rates, and many home loan tax benefits. Availing of these income tax benefits on home loans can help the applicant save a lump sum over the repayment years. Read more to find out some more home loan tax benefits.
You can read the latest updates on the Financial Year Union budget of 2022-2023, presented by our Union Finance Minister Nirmala Sitharaman on 1st February 2022:
Read the given-below income tax benefit on home loans for the financial year 2022 – 2023.
|Income Tax Act||Tax Exemptions|
|Section 80C||Upto Rs. 1.5 lakhs on the principal amount due for repayment|
|Section 24(b)||Upto Rs. 2 lakh on interest payment|
|Section 80EE||There is an additional advantage of upto Rs. 50,000 on the interest payment for first-time homebuyers|
Many people dream of owning a home, but it is also a financial consideration. There is always some financial risk, whether buying a furnished home or building one. But to encourage people to buy houses, the Indian government introduced several sections of tax savings and deductions under the Income Tax Act, 1961. Here are some tax exemption laws that can save you money.
Home Loan Interest Tax Benefit (For Construction or Purchase of Real Estate)
Under Section 24(b) of the Income Tax Act, 1961, you can claim a home loan tax exemption of up to Rs. 2 lakh on the EMI payments paid for your home loan. To claim home loan principal tax benefits under this section, you must fulfill the following conditions:
Principal Amount Home Loan Tax Benefits
Section 80C of the Income Tax Act, 1961 allows all home loan applicants to claim a home loan tax exemption of up to Rs. 1.5 lakh on the principal amount that will be repaid during the tenure. Some conditions help you claim a housing loan tax benefit under this section:
Home Loan Tax Benefits On Interest
As first-time home buyers, applicants can claim tax deductions of about Rs. 50,000 on the interest payment on a home loan. We can say that this home loan tax deduction is more than the exemption of Rs. 2 lakh, which is allowed only under Section 24(b). Here are some conditions that are applicable for claiming tax under Section 80EE.
Read the given-below table below that compares home loan tax benefits under Section 24 and Section 80 C.
|Section 80 C||Section 24(b)|
|You can only save up to Rs. 1.5 lakh.||You can save up to Rs. 2 lakh if self-occupied|
|Applicable to the principal repayment amount.||Applicable on monthly EMIs.|
|The sale or transfer of property within 5 years of possession is not allowed.||If you are not self-occupied, there will be no maximum limit for claiming interest.|
|House must be completed when you apply for tax deduction under this section.||The house must be completed within 5 years of getting the loan amount.|
If you apply for a home loan with a co-applicant, you have a higher chance of getting your home loan approved. This type of home loan is known as Joint Home Loan. Every bank or HFC readily funds a joint home loan, as there are multiple borrowers to repay the loan.
A joint home loan gives the borrowers more repayment flexibility, reduced risk of EMI, and several other benefits. Another prominent factor is that the joint owners are eligible for a joint home loan tax exemption. This means that all the co-applicants can claim housing loan tax benefits separately.
Every co-applicant can claim a tax deduction of up to Rs. 2 lakh for the interest payments and Rs. 1.5 lakh for the principal repayment amount. These benefits are claimed under Section 24(b) and Section 80C. All these applicants must be registered as co-owners on legal documents of the property and pay the EMIs.
|Deductions From||Amount Deduction||Section of the Income Tax Act||Terms|
|Interest||Rs. 2 lakh||24b||For the construction or purchase of a new house. The structure must be completed within 5 years from the financial year the loan was availed.|
|Interest||Rs. 1.5 lakh||80EEA||For property with a stamp value of up to Rs. 45 lakh.|
|Interest||Rs. 50,000||80EE||Loan amount of up to Rs. 35 lakh and for property up to Rs. 50 lakh.|
|Principal||Rs. 1.5 lakh||80C||The property must not be sold before 5 years of possession is completed.|
|Stamp Duty||Rs. 1.5 lakh||80C||Must be claimed in the same financial year as it was spent.|
To take advantage of the home loan tax benefit and tax deduction, you have to follow the steps outlined below:
Step 1: You have to first compute the tax deduction to claim it.
Step 2: Make sure that you are the house owner or co-owner of the property in a joint home loan scheme on the legal documents.
Step 3: You must submit the certificate of home loan interest to your company so that they can adjust the tax-deductible at the source.
Step 4: You can file your income tax by yourself or by an agency.
Step 5: If you are self-employed, you don’t have to submit any documents anywhere. You just have to keep them to yourself in case there is any requirement from the IT department in the future.
The most straightforward way to compute the tax benefits of a home loan scheme is by using an online calculator. You simply have to enter the home loan-related details, and the results will display on your screen. Here are the details you have to enter:
There are some major tax benefits for individuals who own two houses and want to make some tax savings on a home loan. The perks are limited till the time you haven’t compensated for your home loan entirely. The income tax benefit on home loans is as follows:
The most prominent home loan tax benefit is that the borrower can claim a tax deduction both on the principal loan amount and the EMIs. Home loans help individuals save some money from the tax that they have to pay every financial year to the government.
The owner and co-owner are both eligible to claim income tax benefits on home loans.
One can claim a home loan tax exemption of up to Rs. 2 lakh after the complete construction of the house within 5 years Under Section 24 of the Income Tax Act, 1961.
To claim the tax benefits, you have to be either the owner of the property for which the loan has been taken or be the co-applicant of the property. However, you can also claim the benefits through your employer or by filing the ITR on your own.
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