Once you take a home loan, you need to repay the loan amount monthly or annually. The amount repayable can be divided into two sections- the original amount and the interest rate charged on your home loan.
However, the Government has implemented several policies for individuals to enjoy several tax benefits on their loans. These tax benefits and the amount these can waive depend on the loan amount and the kind of loan you take.
Thus you need to know about tax benefits and their policies to enjoy them with your loan. Here are some crucial factors you need to know about home loan tax benefits.
Section 80
Under section 80 of the Income Tax Act, individuals can enjoy up to 1.5 lakhs deduction from the taxable deduction on the principal amount. Such deduction might include several costs and payments like registration fees, stamp duty, and the like.
Section 24
Section 24 of the Income Tax Act helps individuals enjoy a deduction of up to 20 lakhs on the interest repayable against the loan.
However, such a policy is applicable only for constructing houses expected to get over within five years. If the construction of the house takes longer, individuals can only claim up to 30,000 rupees.
Section 80 EE
Under section 80 EE, the Income Tax Act offers tax benefits of 50,00 to first-time borrowers. The 50,000 is granted against the interest paid in every financial year.
However, there are specific terms and conditions in this tax benefit. Individuals must remember that their loan amount must not exceed 30 lakhs, and the value of their property should be worth 50 lakhs or less. If your loan amount exceeds 30 lakhs or your house has a more excellent value, you might not be able to access this tax benefit.
Additional conditions
There are several other conditions associated with the tax benefit. For instance, these are applicable only for entirely constructed houses or when an individual buys a ready-to-move-in property.
Additionally, these tax benefits are not available at once. Instead, you receive it in smaller denominations over a more extended period- generally annually.
Procedure to apply for home loan tax benefits
Applying for enjoying home loan tax benefits can get tricky. Thus, you need to be careful while you use and fill up the documents. Here are some essential points that you should remember-
- You should have the property registered with your name. If you want to apply for tax benefits for joint property, make sure you are the co-owner.
- Calculate the amount that you can claim as tax benefits against your loan.
- Make sure to provide original documents for a speedy sanction of tax benefits.
Conclusion
Most people tend to ignore the tax benefits they can enjoy against their loan primarily because of its complications. However, you should look at the policies and conditions of the different tax benefits available and apply for them beforehand. Tax benefits can reduce your financial burden of repaying the loan and be a friend in testing times.
