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Home Loan Income Tax Benefit

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The Indian government has always encouraged Indians and helped them realize their dream of owning a home. That’s why a house loan qualifies for a Section 80C tax deduction. This post will go through all of the home loan tax deductions.

Home Loan Income Tax Benefit

    Deductions on Interest paid 

    If the loan is granted for home improvement, the same must be completed within 5 years of the end of the fiscal year in which the loan was obtained.

    If you pay an EMI for a home loan, it comprises two elements:

    • Payment of interest; and 
    • Principal Settlement 

    Section 24 allows you to deduct the interest share of your EMI payments for the year up to a maximum of Rs 2 lakh off the overall income. The ceiling exemption for interest charged on self-occupied residential property is Rs 2 lakh beginning with the tax year 2018-19.

    There really is no maximum bound for claiming interest on a rented home. This exemption is available beginning with the year in which the home is constructed.

    Interest paid on a home mortgage during the pre-construction phase is deductible

    If the loan is granted and you are making the EMIs on an under-construction house, your entitlement to claim interest on the home loan as a deductible begins only upon the end of the project or instantly if you acquire a completely completed home.

    The Income Tax Act provides for a deduction for such interest, known as pre-construction interest. A claim in five equal payments is permitted beginning with the year the home is bought or work is finished, in addition to the deductions you are ordinarily qualified to obtain from your house property income. 

    Principal repayment deduction

    Section 80C allows an exemption for the principal component of the EMI paid for the year. The amount that may be exempted may not exceed is Rs 1.5 lakh. However, in order to retain this deduction, the residence must not be transferred within five years of occupancy. Alternatively, the previous deductions will be applied back to the profits in the year of sale.

    Deduction for stamp duty and registration charges

    In addition to the deductible for debt payments, an exemption for stamp duty and registry expenses can be claimed under Section 80C, but only up to Rs 1.5 lakh. But, it may only be deducted in the year in which the expenditures are spent.

    Additional deductions per Section 80EE

    Homebuyers are eligible for an extra exemption of up to Rs 50,000 per Section 80EE. The following requirements must be completed in order to claim this exemption:

    • The loan amount should be Rs 35 lakh or less, and the house value must not be more than Rs 50 lakh.
    • The loan must have been approved from April 1, 2016, to March 31, 2017 period.
    • The individual must be a first-time home buyer and shall not own another home when the loan is approved.

    Section 80EEA additional deduction

    Extra deductions under Section 80EEA for homebuyers of up to Rs 1,50,000 to stimulate the housing industry had been implemented.   The following criteria must be met to claim this deduction:

    • The home’s stamp value should not surpass Rs 45 lakh.
    • The mortgage must be approved between April 1, 2019, and March 31, 2022. 
    • The individual must be a first-time home buyer and shall not own another home when the loan is approved.
    • If the applicant claims deductions under this provision, he or she should not be entitled to claim deductions under Section 80EE.

    Deduction for a Joint-loan

    If the mortgage is obtained jointly, each loan holder can claim home loan interest up to Rs 2 lakh and principal payments up to Rs 1.5 lakh under Section 80C in their tax filings. To be eligible for this exemption, they must also be co-owners of the asset lent. As a result, taking out a loan with your family can help you obtain a higher tax benefit.

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