Being a home or property owner has its own set of advantages. The major advantage of being a house owner is that you will have financial stability for the rest of your life. The value of the property likewise rises with each passing year, implying that the return on investment is constantly on the rise.
If you bought your property with a home loan, you can take advantage of many tax breaks on loan payments, be it on the principle amount borrowed or the interest portion. This article is based on tax benefits available per Section 24 of the Income Tax Act.
Section 24 of Income Tax Act
Section 24 of the Income Tax Act addresses interest paid on house or property mortgages. This section is called ‘Deductions from revenue from housing property.’ Loan interest and the standard deductions are eligible deductions under this section.
The Income Tax Act has various sections that allow you to get tax exemptions on particular assets and expenses. The Act emphasizes the acquisition of residential real estate as one of the most important investment assets. The government has recognized that housing is a critical necessity as well as an asset, and many payments towards buying a first house are tax-free.
Item 24 is an essential section affecting house loans since it permits you to seek deductions on the interest you pay on home loans. Another portion, Section 80C, permits you to claim tax advantages on principal repayments.
The Income from such house property may be recognized in the following scenarios:
- Any income generated out of leasing or renting your house will constitute part of your income;
- In case you own more than a single house or property, the net total value of the properties cumulatively will constitute your income, with an exception for the house and property that you are residing in.
Accommodations In Accordance With Section 24
- If you do not live in the residence, you can claim exemptions for the whole amount of interest paid, with no maximum limit.
- If you do not reside in the housing property because you work or live in another town, and you live in another residence or rented property where you live, you might claim tax-exempt status on interest costs only up to Rs. 2 lakh.
- No brokerage or commission for securing the loan or renter is deducted.
- To claim the full deductions on the loan interest amount, you must purchase or finish the building of the home within three years of taking out the loan. If the building or acquisition is not completed within three years, you can claim just Rs. 30,000 rather than Rs. 2 lakh.
- Again for the loan which you are carrying out, you must have an interest certification.
So, when you are paying a house loan, it is critical that you be mindful of the numerous types of tax breaks available to you. It is either Section 80C, 80EE, or Section 24 of the Income Tax Act, you must take advantage of all of these provisions to maximize benefits while still reaping the benefits and assurance of house ownership.
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