Buying a home is a lifetime dream, so, you start saving quite early to realize it. However good be your savings potential, the spiraling cost of residential property necessitates the need for you to pool funds through external financing. This is where you avail a Home Loan.
With many banks and housing finance companies offering Home Loans at attractive interest rates, your dream home is well within your reach. The Home Loans India market is witnessing burgeoning growth fuelled by the need to own a home by every Indian.
A Home Loan, in addition to providing you with the much needed funds, also offers you the benefit of income tax deductions.
Various Tax Deductions Available on a Home Loan
The amount that you have to repay towards your Home Loan is consolidated as the EMI—your monthly outflow. With the help of a housing loan calculator, your EMI on the loan is finalized.
In the initial years of the loan, the proportion of interest would be high while towards the end of the loan tenure, a major part of the EMI is towards principal repayment. While the interest payments can be an uphill battle, there are some tax deductions you stand to benefit from.
Deduction Under Section 24
You can avail a deduction from your “ Income from house property” in respect of the interest repaid on your Home Loan during a financial year.
In case the house property is self-occupied: In case the house is self-occupied, you can claim deduction on Home Loan interest to the extent of Rs.2 lakh.
In case the house property is not self-occupied: If your home is not self-occupied, you can claim the entire interest paid during the financial year as deduction from your house property income.
Deduction Under Section 80EE
Individuals who are first-time home buyers can avail the tax benefits offered by Section 80EE. Under this clause, you can claim an additional deduction of Rs.50,000 in addition to the deduction available under Section 24.
However, to claim this deduction, you have to fulfill the following conditions;
The cost of the house should be less than Rs.50 lakh and the loan availed should not be more than Rs.35 lakh
The loan should have been taken between 01.04.2016 and 31.03.2017
However, to avail the benefit of the Home Loan interest deduction, the necessary condition is that the project should be completed within 3 years.
Deduction Under Section 80C
The principal component of the housing loan is also eligible for tax deduction under Section 80C. A maximum deduction of Rs.1.5 lakh is available during a financial year. You can claim this deduction on payment basis. But remember that are you eligible to avail deduction under this section only when the construction is completed.
Buying a home should not be the only entry in your wishlist, when you can save on tax payments. After all, claiming these deductions will save you money in the long run.