When you acquire a property through a loan, you should be shrewd enough to make use of various tax-saving options available legally. It will decrease your repayment amount and interest.
Income Tax Laws in India: The Government of India has stipulated various terms and conditions under which you can avail tax deductions for repayment of the loan. According to the Income Tax laws, a person can claim deductions on housing loan interest. The maximum interest amount that comes under the deduction claim has increased from 2 lakh to 3.5 lakh.
Under Section 80C, you can claim a tax deduction of up to Rs. 1.5 lakh on your home loan. The tax is deducted from that paid on the principal. It includes the registration charges and stamps duty too. The deduction is made from the gross-total income before tax is calculated.
Under Section 24, you can claim a tax deduction of up to Rs. 2 lakh on the amount paid as interest. However, you can claim the deduction only if the house gets constructed within five years. It is on the gross-total income, which reduces the tax payable.
Under Section 80EEA, you can claim a home loan tax benefit of up to Rs. 1.5 lakh if you are a first-time homebuyer.
EMI Payment: EMI consists of the amount of the loan and the interest amount. You can claim a deduction from your income tax on the principal and interest paid towards the repayment of the loan. According to the Income Tax Act 1961, you can save tax on your income when you take a loan for the purchase of a house.
Benefits for Women: Women are provided with special interest rates and discounts when they apply for a home loan. When you apply for a loan along with your spouse, you can claim a tax deduction up to Rs. 1.5 lakh on the principal amount. It comes under Section 80C. Under Section 24, you can claim deduction up to Rs. 2 lakh. Stamp duty and registration expenses are included in it. As the default rate is lower among women, loan approval is higher for them.
House under Construction: When the house is under construction, you can claim tax benefits under Sec 80C. If the house construction ends within five years, a deduction of Rs. 2 lakh is possible. If it does not end in five years, a deduction amount of Rs. 30,000 is possible.
Top-up on Loan: If you take a top-up on your loan, you can claim home loan tax benefits. Top-up is the loan amount required to repair or renovate your house or a loan for a wedding celebration on your property, which is already under a long-term mortgage.
Benefits from Insurance Premium: When you have an insurance plan to protect your loan, the premium paid comes under tax deduction. According to Sec 80C, the borrower can claim the benefits.
As the cost of building or repairing a house is high, it is best to watch out for various schemes legally available to reduce interest paid.