Buying a home is a dream for many, and in India, taking a home loan can make that dream more attainable. Apart from owning a house, home loan borrowers can also enjoy significant tax benefits under the Income Tax Act. Let’s explore these benefits and how they can help you save money.
Key Tax Benefits:
Deduction on Interest Paid: Under Section 24(b) of the Income Tax Act, you can claim a deduction of up to ₹2 lakh on the interest paid on your home loan during a financial year. This deduction is available for a self-occupied property. For rented properties, the entire interest amount can be claimed, which can be beneficial for investors.
Deduction on Principal Repayment: Under Section 80C, you can claim a deduction of up to ₹1.5 lakh on the principal amount repaid during the year. This limit includes various other investments, such as Public Provident Fund (PPF) and National Pension Scheme (NPS). So keep that in mind when calculating your total deductions.
Additional Benefits for First-Time Homebuyers: If you are a first-time homebuyer, you can also benefit from an additional deduction of ₹50,000 under Section 80EE. This is applicable if the loan amount is up to ₹35 lakh and the property value is not more than ₹50 lakh. This benefit is over and above the ₹2 lakh interest deduction.
Benefits for Joint Borrowers: If you take a home loan jointly with a spouse or family member, both of you can claim the deductions separately. This means you could potentially save up to ₹4 lakh on interest payments and ₹3 lakh on principal repayment combined. This depends on your share of the loan.
Example:
Let’s consider an example to understand how these benefits work. Suppose you have taken a home loan of ₹30 lakh to purchase your first home. Over the financial year, you pay ₹1.2 lakh towards the principal and ₹2 lakh towards the interest.
Principal Repayment (Section 80C): You can claim ₹1.2 lakh as a deduction from your taxable income.
Interest Payment (Section 24(b)): You can claim ₹2 lakh as a deduction for the interest paid.
First-Time Homebuyer Benefit (Section 80EE): Since you are a first-time buyer, you can claim an additional ₹50,000 on interest, bringing your total interest deduction to ₹2.5 lakh.
Conclusion:
By utilizing these tax benefits, home loan borrowers in India can significantly reduce their tax liabilities, making homeownership more affordable. Always consult a tax professional to understand how these deductions can specifically apply to your situation, ensuring you make the most of your home loan investment. Happy home buying!
– Ketaki Dandekar (Team Arthology)
Read more about Tax Benefits for Home Loans here – https://cleartax.in/s/tax-benefits