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Buying a home brings with it many benefits – the joy of owning a home, an investment you can turn back to in times of need, and a source of income created by letting it out to renters. Besides these primary functions, buying a home can also help you save on income tax.
The advantage of taking a home loan to buy a brand new house is that you can get ample income tax deductions every year. One of the pre-conditions to benefit from this is that you should be the legal owner of the property as well as the borrower of the loan to be eligible for tax deductions.
Tax Deductions available for your Home Loan
The two types of deductions you can claim on your income tax are described below:
- Tax Deduction on Home Loan Interest
Section 24 of the Income Tax Act, 1961, specifies the deduction you can claim from the interest amount you pay towards your home loan.
They can be further divided based on the use and condition of the property as follows:
- Resident of the Home: If you or your family stay in the home on which you have taken the home loan, you can claim deduction up to Rs.2 lakh on the home loan interest. The same applies if the house is left vacant.
- Landlord of the Property: If you rent out the property, you can claim the entire interest amount paid towards the loan.
- Incompletion: If you have availed a home loan but have not completed the purchase or construction of the house within 5 years from the time you took the loan, you can claim only up to Rs.30,000 instead of Rs.2 lakh on the home loan interest amount.
- Tax Deduction on Home Loan Principal Repayment
You can also claim deduction on the principal repayment of your home loan. The limit and other conditions are given below:
- Maximum Cap: Section 80C allows various deductions – home loan principal repayment is one of them. The overall limit included in this section of the Income Tax Act,1961 is Rs.1.5 lakh.
- Stamp Duty and Registration Charges: You can also claim the stamp duty and registration charges applicable on buying the property within the Rs.1.5 lakh limit. Make sure you claim the amount the same year you make the payments.
- Transfer of Possession: If you choose to sell the house before completion of 5 years from the time you applied for the loan, the deduction amount will be added back once you sell the house.
How to Claim Income Tax Deduction for your Home Loan
Once the construction/possession of the house is complete, you can claim the tax deduction in the following ways:
- Employed Individuals: Submit the home loan interest certificate to your employer so that the tax deductions can be adjusted at the source. You can also choose to calculate taxes on your own and claim deductions at the time of tax filing.
- Self-Employed Individuals: If you are self-employed, you simply have to keep track of the advance tax liability and keep the records for your reference or the IT Department’s reference.
Buying a home, thus, helps you save on income tax too! That should be an added pro if you are in a dilemma as to when to buy a home. Additionally, the pandemic has caused a reduction of prices in real estate. So, you can take advantage of the all-time-low home loan interest rate as well as reduced property prices.
What’s more, HM group currently offers a great scheme wherein you have to pay only Rs.10,000 to own one of the 30-odd flats available under this scheme. You can move in right after the formalities are completed and choose to pay the EMIs at a later point in time post, say, 10 whole months! This is the best deal you can get for a prestigious apartment located in a central region.
So, what are you waiting for? Call us on 8880225555 for a home visit appointment, today!