Owning a house is always great! It helps to build a secure and stable life for everyone living in the house. With several initiatives like Pradhan Mantri Awas Yojana, the affordability of the house has become everyone’s taste. Flashing a green light for encouraging the citizens to invest their money in a long term commitment, the government also provides tax benefits to the home buyers if they take a home loan for buying a house or for construction of their home.
Getting tax deductions for the interest paid on a home loan:
Tax Deductions for a first home: For a self-occupied property, buyers can claim a tax deduction up to Rs. 2 Lakhs on the interest paid towards the home construction loan. However, the construction of the property must be completed within five years. For a period exceeding 5 years, citizens can claim tax deductions up to Rs. 30,000. Further, citizens can get additional tax relaxation for up to Rs. 1.5 Lakhs if the house is purchased for a budget up to Rs. 45 Lakhs before March 2020
Tax Deductions for a second home: Home loan buyers can tax benefits up to Rs. 2 Lakhs on the second home. However, if the actual interest paid on the home loan is less than Rs 2 Lakhs, they are entitled to receive the tax deductions for the same amount.
Tax Deductions for the under-construction house: The overall cap on tax benefits for the under-construction home is Rs 2 Lakhs. The buyers can claim tax deductions in equal instalments after the construction of the house for five financial years.
Tax deductions for a rented property: If the property is not self-occupied, then you can tax deductions up to Rs. 2 Lakhs. In case, the total interest paid by the taxpayer is less than Rs 2 Lakhs, then the tax deductions can be claimed for the same amount.
How much can you claim for tax deductions on the principal amount of a home loan:
Tax Deductions for a first home: Under Sec 80C of the Income Tax Act, home loan buyers can claim up to Rs. 1.5 lakhs for the principal repayment of loans if the property is self-occupied. Also, having a regular check about the home loan eligibility is considered to be a viable choice.
Tax deductions for a rented property: If the property is not self-occupied, then you can tax deductions up to Rs. 1.5 lakhs on the principal amount paid towards the home loan. However, owners are entitled to receive these tax deductions only if he is living in another city for work-related purposes.
Tax Deductions for a second home and under- construction property: There are no tax deductions available for a home loan taken for the second house or for under-construction home.
Tax exemptions for a joint home loan: If the home loan is taken jointly by multiple borrowers, the tax deduction is available up to the maximum limit for each one. However, the owners of the house must also be borrowers of the house as well.
Tax deductions for stamp duty and registration charges: Home loan buyers can also claim up to Rs. 1.5 Lakhs on stamp duty and registration charges in the year when expenses were made.
Additional tax benefits under Sec 80EE: You can claim tax deductions up to Rs. 50,000 if the loan is sanctioned between 1st April 2016 to 31st March 2017. To claim these tax benefits, the home loan should be less than Rs. 35 Lakhs and the property of the house should not exceed Rs. 50 Lakhs.
Conclusion: You can claim the tax deductions for a home loan while filing the Income Tax Returns or while submitting the home loan interest certificate to your employer.
Summary:Claim for Tax deduction on Home Loan Interest Payments
Flashing a green light for encouraging the citizens to invest their money in a long term commitment, the government also provides tax benefits to the home buyers if they take a home loan for buying a house or for construction of their home.
- For a self-occupied property, buyers can claim a tax deduction up to Rs. 2 Lakhs on the interest paid if the property is completed within five years. For a period exceeding 5 years, citizens can claim tax deductions up to Rs. 30,000.
- Home loan buyers can tax benefits up to Rs. 2 Lakhs on the second home. However, if the actual interest paid on the home loan is less than Rs 2 Lakhs, they are entitled to receive the tax deductions for the same amount.
- The overall cap on tax benefits for the under-construction home is Rs 2 Lakhs.
- Under Sec 80C of the Income Tax Act, home loan buyers can claim up to Rs. 1.5 lakhs for the principal repayment of loans if the property is self-occupied.
- If the property is not self-occupied, then you can tax deductions up to Rs. 1.5 lakhs on the principal amount paid towards the home loan. However, owners are entitled to receive these tax deductions only if he is living in another city for work-related purposes.
- There are no tax deductions available for a home loan taken for the second house or for an under-construction home.
