Buying a home is a dream come true for most of us. It’s a huge investment, and we want to ensure that we get the best possible deal. One of the ways to do that is by availing tax benefits on home loans. The Indian government offers several home loan tax benefits to those who have taken a housing loan, and it’s essential to know how to make the most of them. In this post, we’ll take a look at the eight effective ways to enjoy tax benefits on housing loans:
1. Claim tax deductions on home loan interest
The interest paid on a home loan is eligible for a tax deduction under section 24 of the Income Tax Act. The maximum amount that can be claimed is Rs. 2 lakhs per year, provided the property is self-occupied. Several home finance options are available to help you in tax benefits on home loan. If the property is let out, there is no limit on the amount of interest that can be claimed as a tax deduction. It’s important to note that the deduction is available only for the interest component of the EMI and not the principal.
2. Claim tax deductions on home loan principal repayment
The principal amount repaid towards the home loan is eligible for a tax deduction under section 80C of the Income Tax Act. The maximum amount that can be claimed is Rs. 1.5 lakhs per year, along with other eligible investments. It’s important to note that the deduction is available only if the property is self-occupied and not let out.
3. Claim tax deductions on stamp duty and registration charges
The stamp duty and registration charges paid during the purchase of a property are eligible for a tax deduction under section 80C of the Income Tax Act. The maximum amount that can be claimed is Rs. 1.5 lakhs per year, along with other eligible investments.
4. Claim tax deductions on home loan processing fees
The home loan processing fees paid to the bank or financial institution are eligible for a tax deduction under section 24 of the Income Tax Act. The maximum amount that can be claimed is Rs. 5,000 per year.
5. Joint home loan tax benefits
If you have taken a joint home loan with your spouse, both of you are eligible for tax benefits. Both the co-borrowers can claim deductions on the interest paid and principal repaid on the home loan, subject to the maximum limits mentioned earlier.
6. Tax benefits on home loan prepayment
If you prepay your home loan, you can claim tax benefits on the amount prepaid. The tax deduction can be claimed under section 80C of the Income Tax Act, subject to the maximum limit of Rs. 1.5 lakhs per year.
7. Income tax calculator for home loans
Before you apply for a home loan, it’s essential to know the tax benefits you can avail of. An income tax calculator for home loans can help you understand how much tax you can save on your home loan. You can use the calculator to estimate the tax deductions on home loan interest, principal, processing fees, and other charges.
8. Home finance options for tax benefits
For instance, if you take a loan from a housing finance company, you can claim additional tax deductions under section 80EEA of the Income Tax Act. The deduction is available up to Rs. 1.5 lakhs per year on the interest paid on the home loan. Additionally, you can also consider taking a top-up loan on your home loan, which can be used for home renovation or other purposes. The interest paid on a top-up loan is also eligible for a tax deduction under section 24 of the Income Tax Act.
Additionally, using an income tax calculator for home loans can help you estimate your tax savings and plan your finances better. Consider exploring different home finance options to maximize your tax benefits, such as taking a loan from a housing finance company or a top-up loan for home renovation.
To sum it up, by taking advantage of these eight ways to avail of tax benefits on home loans, you can make the most of your investment and save money in the long run. So, don’t forget to consult with a tax advisor and explore all the available options before applying for a home loan. Happy home buying!