Tips to save income tax on home loan

No matter what your earnings are, dreaming of buying your own house is something that almost everyone imagines. However, the biggest obstacle in doing so is the finances. Right? While many people easily take home loans, there are others who are afraid of taking loans as there are certain amounts of interest charged upon the same. But, thanks to the Indian government that has laid down certain tax-saving options for the advantage of all those willing to buy their dream house. So, in this blog, let’s walk you through some of the tips to save income tax on a home loan. 

What is Home Loan?

A home loan is a convenient way in which individuals can get financial aid in buying their dream home. Without worrying about how to instantly pay the entire amount for buying a home, a home loan surely is a hassle-free option. However, it is important to consider the time frame within which the loan amount must be returned, otherwise, there are certain consequences. Furthermore, the government of India offers certain tax benefits during the repayment of loans. So, let us take a look at the tax-saving options available.

• Section 80C

Section 80C of the Income Tax Act of 1961, offers tax benefits on a home loan.  A maximum tax benefit of up to Rs. 1,50,000 can be claimed under this section if you have taken home loans. However, please note that this tax benefit can be claimed only on properties that are fully complete and not on any property that is under construction. 

There is also a clause that is attached to this section which states that the tax-benefit amount shall be revoked in case the lender or house owner here sells the house within a period of 5 years. If there is an instance of joint loans, then there are deductions offered under this section. A maximum of Rs. 2 lakhs can be claimed by each lender under this section. 

• Section 24(B)

Under Section 24(B), individuals can get tax benefits on the interest that is paid toward the interest of the home loan. A maximum of Rs. 2 lakhs can be claimed as the interest paid. This section also has a few clauses attached as the following:

1. If the construction of a house is not completed within 5 years, then only Rs. 30,000 can be claimed
2. If the house is sold within 5 years, then there is no benefit

• Section 80EE

There are tax benefits on home loans under section 80EE of the Income Tax Act, 1961 as well. This section allows a maximum tax benefit of Rs. 1,50,000 and is applicable on the interest levied on home loans. Please note that the tax benefits offered under this section are over and above that of Section 24(B). However, the value of the house must be lower than Rs. 45 lakhs during the time of purchase, only then the tax benefit can be enjoyed.

• Section 80 EEA

This section allows additional tax benefits of up to Rs 50,000 on the interest paid toward home loans. However, this section will not be applicable in the fiscal year, 2023. 

So, basically, there are deductions on the principal repayment, interest that is paid towards loan repayment during the pre-construction period, registration charges, stamp duty, and a few more. 

Things to know before claiming tax benefits on home loans

There are certain things that you should know about before claiming tax benefits on home loans such as the following:

• Tax benefits can only be availed if you are the owner or co-owner of the house
• You need to submit a home loan tax certificate for claiming tax benefits
• You need to be aware of all the deductions available and then apply for tax benefits

Take Away

So, while you are planning to take a home loan for your dream house, also make sure to choose the right lender. Doing so will help you to enjoy all the tax benefits available under home loans in a hassle-free manner.

Also Read: 

Difference between TDS and TCS