Home Loans, Tax Deductions, and Income Tax may all seem overwhelming, but we have simplified it for you! Let’s understand the benefits of home loans alongside Sunita and her husband Rajesh, who are in search of clarity on tax deductions. The couple decided to seek help from their friend Tara, who had only recently found her new home in SOBHA Lifestyle Legacy and was now reaping benefits from several sections under the Income Tax Act after availing a house loan.
Tara explained to them that the Central government has put in place several benefits under various sections of the Income Tax Act to help new house buyers. Furthermore, Tara added that the discounts are in terms of loans, stamp duty and tax deductions!
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KNOW YOUR TAX DEDUCTIONS
You can get tax benefits under section 80C, 80EE and 24(b) of the Income Tax Acts. These benefits not only encourage new house buyers, but also to have a substantial amount of money every year in terms of savings.
BENEFITS UNDER SECTION 80C
Under this section of the Income Tax Act, you can claim a tax deduction of Rs 1.5 lakh from the taxable income on the principal repayment for both self-occupied and let-out properties. Even charges for stamp duty and registration can be claimed under this section, but only once. To claim it, you must first complete the construction of the housing property and must not sell the property within five years of possession. If the property is sold within five years after possession, any deduction claimed will be reversed in the year it is sold and be added as part of your income for the year of sale.
ADDITIONAL BENEFITS WITH SECTION 24
The buyer can claim deductions up to Rs 2 lakh on the interest amount payable for a self-occupied property. However, this is only applicable upon the completion of construction within 5 years from the end of the financial year that the loan was taken. Should the project take longer to finish, then you can claim only up to Rs 30,000.
FURTHER TAX BENEFITS UNDER SECTION 80EE
For an additional tax benefit of Rs 1.5 lakh on the interest payments, Section 80EE comes to the rescue. However, this section is only applicable to first-time house buyers against the interest payable every financial year. Additionally, the home loan amount must not exceed Rs 35 lakh and the property’s value must be within Rs 50 lakh to avail this benefit.
SECTION 80EEA UNDER PRADHAN MANTRI AWAS YOJANA
The Pradhan Mantri Awas Yojana scheme has been set up to make buying a house more affordable. Any individual with an annual income between Rs 3 lakh and Rs 18 lakh can apply for this scheme. Under this scheme, you can get a subsidy of up to Rs 2.67 lakh. However, neither the applicant nor any other family member must have a pucca house in any part of the country.
ENJOY COMBINED BENEFITS ON JOINT HOUSE LOANS
House loans taken jointly bring tax benefits to both individuals when they each claim their own deductions individually. The loan borrowers can each claim a maximum income of Rs 2 lakh on the interest paid and Rs 1.5 lakh on the principal amount, adding up to Rs 3.5 lakh. This way they can enjoy a combined benefit of a whopping Rs 7 lakh. The only prerequisite is that both individuals must be co-owners of that residential property.
TAX BENEFITS ON SECOND HOUSE
Tax benefits are applicable only on the payable interests, wherein you can claim the entire interest amount paid without any cap.
THE FARTHEST YOU CAN GO WITH DEDUCTIONS
Sunita and Rajesh know that a full tax deduction can be availed. That can be done when an individual avails a 90% loan on a property valued at Rs 45 lakh for 20 years. The interest rate must be 9% for this loan, then he/she can reap the full tax deduction of Rs 3.5 lakh.
They are now ready to make a confident investment into their own house. What’s even more exciting is that they have narrowed down on a flat in one of the upcoming projects of SOBHA Limited – SOBHA Windsor It’s your turn next.
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