Home Loan Tax Benefits and Exemptions
Home Loan Tax Benefits and Exemptions
Buying a dream home nowadays is not as difficult as climbing a tricky hill, home loans make it quite easier for us. Manage to buy home from one’s own savings seems next to impossible, even for high worth individuals. Loan is the only safe option. Banks provides various home loan schemes and you can choose one of them, which we had been discussed previously. But it always makes an individual under high burden, and there is no wheeze to make individual free from paying high return of loan.
There is a way when you have no saving all because paying for your dream home and its implications for a home loan, at that time there is only a thing you can do to save certain bucks of yours, which is possible by utilizing tax benefits you are getting from income tax rules of the government. Even if an individual is having money to buy home absolutely, then also it’s a better option to go for home loan as it helps you to save your money in tax paying as well as you don’t have to pay full money at a time so some amount of money will be in your hand for any uncertainty which may waiting for you in future!
Let me tell you the tax rules which will give you some relaxation while you have taken loan. Tax rebates are availed on a housing loan which will reduce an individual’s tax burden which results in to reduced burden of housing loan.
What are the major tax benefits of housing loan?
Tax benefits are deduction is allowed to a tax payer to the certain extent which helps to reduce the burden of the assessee. The home loans are eligible for tax benefits under three sections of Indian Income tax act; i.e. under section 80C, section 24 and section 80EE.
Generally loan amount i.e. EMI consists of two components principle amount and interest. One may be eligible for claiming benefits for both components.
Section 80C: tax benefit on principle amount of home loan
The maximum allowable deduction limit under section 80C is RS 150,000. Deduction under section 80C is accessible on payment or disbursement basis rather than the year for which the payment has made. The payment paid as a registration and stamp duty charges is allowable to deduct from tax under section 80C even if the assessee has not taken loan.
Tax benefit of home loan under this section for repayment of your principle amount part of home loan is allowed only after the construction is complete and completion certificate has been awarded to the project.
Section 80EE: tax benefits on interest of home loan taken for the residential purpose.
This section 80EE is allowable to the assessee who does not own any Residential house property on the date of sanction of loan. Maximum allowable tax benefit under section 80EE is Rs. 50,000. This must be over and above the deduction of Rs.2,00 000 under section 24 and Rs. 150,000 under section 80C.
Certain conditions for availing benefits of section 80EE:
1. The deduction under this section is only allowed of the value of the property which is purchased or the value of the house property must be 50 lakhs or we can say should not exceed 50 lakhs, and value of the loan taken does not exceed 35 lakhs.
2. The assessee should purchase home for the first time, i.e. he/she never purchased any house property before.
3. The loan should be sanction between the previous year i.e for now 1st April 2018 to 31st march 2019
Section 24: benefit on interest of borrowed capital from house property.
The deduction allowable under this section 24 is subject to maximum limit of Rs. 2 lakhs. If in any case the property is not acquired or constructed within 3 years from the end of financial year in which the loan was taken, the interest benefit in this case will reduced from 2 lakhs to Rs.30,000 and the limit of three years has been increased to 5 years.
In case the property for which the home loan has taken is not self occupied, then in this case no maximum limit prescribed and the assessee can take deduction in tax of whole interest amount under section 24.
This deduction of interest on home loan under section 24 is deductible on accrual basis. As compared to section 80 which allows for deduction only on payment basis but deduction under section 24 should be claimed on yearly basis even if no payment made during the year.
Amendment in Budget 2017
Under the head income from house property, if the non self occupied property, the interest paid is reduced from the rent paid considered under income from house property. If incase it may happen that the interest paid is higher than rent earned which results in loss from house property, and this loss is allowed to be set off with income from any other head. From the financial year 2017-18 loss of maximum of Rs. 2 lakhs is allowed to be set off with income from other heads, this amount, which cannot set off can be carried forward to future years.
Here’s the tax benefit and exemption on home loan in a table
|Home Loan Tax Deduction Details|
|80C||Principal||Rs.1.5 lakh||Property cannot be sold within 5 years of purchase|
|80C||Stamp duty||Rs.1.5 lakh||Available only on the year, in which the stamp duty expenses are paid|
|24B||Interest||Rs.2 lakh||Loan must be availed for purchase or construction and the property needs to be constructed with 5 years of availing the loan|
|80E||Interest||Rs.50,000||Loan amount should not exceed Rs.35 lakh while the property value should not exceed Rs.50 lakh|