INTRODUCTION: INCOME TAX BENEFITS ON HOME LOAN
A major source of financing in India, housing loans enable millions of individuals to purchase the homes of their dreams. In the near future, are you considering getting a home loan from NBFCs like NAVI? A home loan is a large sum of money that lenders give to help you buy the house of your dreams. According to the rules of the Income Tax Act of 1961, getting a loan can help you save money on taxes. This article is ready to assist you. Let’s discuss Home loan tax benefits.
INCOME TAX REBATE ON HOME LOAN
The term income tax rebate is used in a number of contexts, all of which refer to a reduction in tax due. On the other hand, people who monitor the status of their income tax refund frequently refer to the phrase rebate as a refund. Similarly, rebates also refer to the deductions allowed by provisions like 80C, 80D, and 24B.
The Income Tax Act of 1961 contains a number of provisions for a tax rebate on home loans. Such a borrower may request income tax benefits on home loans in the following three principal areas:
- For principal payments on home loans, Section 80C of the ITA permits annual tax deductions of up to Rs. 1.5 lakh.
- You are qualified for a tax deduction on house loan interest payments of up to Rs. 2 lakh under Section 24 of the Income Tax Act.
- First-time homeowners may also be eligible for additional tax savings of up to Rs. 50000 under the terms of Section 80EE. The interest payments on the loan are subtracted from this amount.
Remember that tax refunds are only computed based on your taxable income, not your net income.
1.Home Loans Tax Benefits: Section 24B
- Based on your house loan interest payments, you can deduct up to Rs. 2 lakh from your income tax responsibilities.
- To be eligible for this, the property in issue must finish construction within five years. If this is not done, taxpayers’ potential savings will only be Rs. 30,000.
2.Home Loans Tax Benefits: Section 80C
- On the principal repayment of your home loan, you may deduct a maximum of Rs. 1.5 lakh from your taxable income.
- The income tax rebate for home loans under section 80C also includes stamp duty and registration fees; however, there is a cap of 1.5 lakh per financial year.
3.Home Loans Tax Benefits: Section 80EE
You would qualify for this tax benefit if you obtained a home loan during the 2016–2017 fiscal year. If you meet the criteria below, you may be qualified for an extra deduction of Rs. 50,000 in addition to the 2 lakhs that can be deducted for interest paid under section 80EE.
- The property being used as collateral for the loan must be worth a minimum of Rs. 50 lakhs and a maximum of Rs. 35 lakhs.
- Between April 1, 2016, and March 31, 2017, you should have received the penalty.
- Only residential property and first-time homebuyers are eligible for this deduction.
Income Tax Benefit on Home Loan: Section 80EEA
By providing an additional income tax benefit of Rs. 1.5 lakh on home loan interest payments made between April 1, 2019, and March 31, 2020, the 2019 Union Budget, which was unveiled by Finance Minister Nirmala Sitharaman, significantly boosted the “Housing for All” initiative. This deduction’s main objective is to assist prospective homeowners in securing affordable finance in order to fulfil the government of India’s “Housing for All” agenda.
Section 80EEA allows homebuyers to deduct an additional Rs 1.5 lakh for interest payments on their loan. This is besides the Section 24 limit of Rs 2 lakh for tax exemptions (b).
The following criteria must be met in order to claim the income tax benefit on a home loan under this section:
- Home loans tax Benefits under this provision are only available to first-time homeowners. Consequently, the customer should not be the owner of any additional residential property.
- Only interest payments on the mortgage may be deducted.
- Between April 1 2019, and March 31 2021, the home loan was supposed to be taken out.
- The property’s worth should not exceed Rs. 45 lakhs.
- If the person requests an income tax rebate on a home loan under this section, they should not be permitted to do so under Section 80EE.
INCOME TAX BENEFIT ON JOINT HOME LOAN & SECOND HOME LOAN
Each homeowner who takes out a home loan jointly is eligible to deduct their interest payments up to Rs. 2 lakh under Section 24b & their principal repayments up to Rs. 1.5 lakh (Section 80c). In comparison to a single-applicant home loan, this increases the number of deductions that are available. However, it is necessary that both applicants be joint owners of the property and pay their EMIs.Therefore, you may receive more tax benefits from a joint home loan.
The tax deduction for home loan interest will be available for two self-occupied rental homes starting with Assessment Year 2020–21. The deduction is only allowed up to a total of 30,000 or Rs. 2 lakh under this provision; otherwise, the deduction is only allowed up to that amount.
HOW TO CALCULATE HOME LOAN TAX BENEFITS:
The most straightforward method to calculate your tax benefits on a home loan is to use an online calculator. Submit your home loan information, select Calculate, and a thorough tabulation will appear. The calculator will show three key pieces of information when you have entered all of these specifics.
- First of all, it will show the total amount of tax due, excluding the advantages of a home loan.
- Next, after taking into account the various tax-saving provisions for borrowers of housing loans, taxpayers would learn about their obligations.
- Finally, a different part will go into detail about how much tax you save by paying off your loan.
HOW TO CLAIM HOME LOANS TAX BENEFITS:
Home loan Tax benefits are easy to obtain. The procedures for requesting your tax rebate on a home loan are listed below.
- Make a decision regarding the tax rebate that will be taken.
- Verify that you are the owner of the property or a co-borrower on loan.
- To change the tax-deductible at source, give your employer the certificate for your mortgage interest.
- You must file your tax return independently if you don’t finish the previous stage.
- You are exempt from submitting these records if you are an independent contractor. Just keep them around in case the IT department needs them in the future.
CONCLUSION: INCOME TAX BENEFITS ON HOME LOAN
We hope you now understand what an income tax rebate on a home loan is and other income tax benefits on a home loan. In addition, a tax rebate on a home loan can only be claimed by a resident Indian citizen. Furthermore, by effectively using the tax deductions available to you, you can save a significant amount of money on its repayment. We also talked about how to claim and calculate income tax home loan benefits. So take your time reading this article carefully. Thank you!
Also Read this : Section 80EE Of The Income Tax Act: Tax Deduction On Home Loan Interest
