28 Home loans take individuals one step closer to their dreams of owning a property. Besides being a significant resource for financing a house, home loans also bring much relief to the country’s taxpayers. For more clarity, home loan repayment is divided into two parts – principal and interest payment. The Income Tax Act of 1961 enables eligible taxpayers to avail of home loan tax benefits through different provisions. Table of Contents Toggle 5 Ways to Get Income Tax Benefits on Home LoansA Manual to Calculate Home Loan Tax Benefit Final Thoughts 5 Ways to Get Income Tax Benefits on Home Loans Here are the 5 ways you can claim tax benefits on your home loans – Section 24(B) Under this section, borrowers can claim tax deductions on the interest payable on the borrowed amount. They can claim a deduction of up to Rs 2 lakh on interest payments in a financial year. However, to avail of this benefit, individuals must complete the property’s acquisition or construction. Note that the housing loan tax benefit under section 24(B) applies to both self-occupied and let-out properties. Here, alongside the interest, it also includes prepayment charges, service fees, commission, brokerage and other relevant charges. Also, you need to remember that tax benefit under this section is not allowed on a paid basis but rather on an accrual setup. You can deduct the amount paid towards the interest payment from your taxable income while filing for that year’s tax. You also need to submit relevant documents to support your claims to your employers or Income Tax Department. Section 80 (C) The Government of India allows homeowners to claim a tax rebate on the principal amount repayment of a home loan. In this context, individuals can claim a housing loan tax benefit not exceeding Rs 1.5 lakh in a fiscal year. Note that the amount paid towards stamp duty and registration charges are also subject to tax deduction under this section. However, in this case, the claimed benefit is also capped at Rs 1.5 lakh in a year. Therefore, it is clear that an individual servicing a home loan can avail of tax benefits of up to Rs.3.5 lakh in a financial year under sections 24(B) and 80C combined. Section 80EE This section also allows First-time homeowners additional home loan tax benefits. Through this provision, individuals can apply for tax benefits on interest payments of up to Rs 50,000 on and above Rs 2 lakh, available under section 24(B). Remember that to claim tax exemptions on home loans under 80EE – You must not own a second home. The property value should not be more than Rs 50 lakh. The home loan amount must not be more than Rs 35 lakh. You can claim this tax benefit every year until the total interest is repaid. To avail of this benefit, you need to First, exhaust the Rs 2 lakh under section 24(B). Now apply for additional tax benefits. This section does not specify that only the country’s residents can apply for this deduction. It means Non-Resident Indians (NRIs) can also apply for the same. Likewise, it is also not mandated that the property needs to be self-occupied. It means you can avail of this benefit while living in a rented house. Tax Benefits for Joint Home Loans Besides reducing the EMI burden, a joint home loan allows co-borrowers to save substantially on taxable income. Individuals can apply for a joint home loan with their spouses or eligible candidates. In doing so, all co-owners are subject to home loan tax benefits on principal and interest payments. Section 24(B) allows each co-borrower to claim tax exemptions of up to Rs 2 lakh on the interest outgo. Likewise, section 80(C) enables each co-borrower to apply for tax benefits of up to Rs 1.5 lakh on principal payments in a financial year. However, to leverage this tax provision, You need to co-own the property. You also need to be a co-borrower. The property must be fully constructed. Note that if the co-owners have an equal percentage of ownership but borrowed in a 60:40 ratio, the tax benefits will also be shared in the corresponding ratio. Tax Benefits on Purchasing a Second Home Individuals looking to purchase a second home can also enjoy housing loan tax benefits on principal payments of up to Rs 1.5 lakh under section 80(C). They can also claim tax benefits on interest payments of up to Rs 2 lakh under section 24(B). Following are the provisions where one can enjoy tax benefits on a home loan for a second home. Both first and second homes are self-occupied Both first and second homes are let-out The first home is self-occupied, and the second home is let-out Besides knowing the home loan tax benefits provisions, individuals must also learn how to calculate them to save on taxable income. A Manual to Calculate Home Loan Tax Benefit An individual needs to put in some basic information to calculate the tax benefits they can claim while servicing a home loan. This includes – Loan amount Home loan interest rate Tenure Loan sanction date Total annual taxable income Exemptions they qualify for Furthermore, using a home loan calculator, you can simplify the housing loan calculation even further. It will show you the amortisation schedule of the EMI payment so that you can determine the interest and principal component of your monthly instalments. Final Thoughts In a nutshell, a home loan is a long-term financial commitment, and you can maximise your savings on taxable income through these tax-saving provisions available in the country. So, remember these details while planning for this credit option, and then decide. 0 comment 0 FacebookTwitterPinterestEmail Uneeb Khan Uneeb Khan CEO at blogili.com. Have 4 years of experience in the websites field. 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