Everybody wishes to own their “Dream Home” but this wish requires a determined endeavor to become a reality. As online loan facility advances with technology, home loans have become a trending affair. Furthermore, one can even enjoy several easily available home loan tax benefits with just a click. Read on to find out everything that you must know about home loans and home loan tax benefits!
A home loan is a sum of money borrowed from a lender to purchase a property (which can be either a residential flat or a piece of land) which is kept as collateral till the loan gets cleared by the lender. The lender covers up to 90% of the cost involved in buying a property, while the remainder has to be paid as a down payment in a lump sum. It offers this amount to be paid at reasonable interest rates for a long tenure. There are EMI schemes through which one can choose to repay the loan.
Why Should You Take a Home Loan?
Getting a home loan comes with a sentimental value of self-accomplishment plus a set of benefits as follows:
- Low-Interest Rates Loan – As mentioned earlier, a home loan levies low and convenient interest rates. Furthermore, a home loan is a long-term (say 10 or more years) affair that needs to be managed effectively with the ups and downs of the interest rates. The lower interests would ensure that the installment amount never jumps up to inconvenient numbers and, therefore, help repay the loan faster.
- Small Installments – Home loans put less pressure on your pocket because the installments are small and easy to manage. The only time you would need to pay in a lump sum, is the down payment sum to the builder at the time of construction.
- Long Repayment Tenure – Home loans give you the leisure to pay the entire loan in small amounts over a long period of time. The repayment tenure can be as long as 10-15 years to pay the home loan.
- Tax Benefits – There are several home loan tax benefits that you can avail yourself of with your home loan. Below, we have discussed them in detail.
Tax Benefits Available with Home Loans
A home loan is a good source to lighten your tax burden for a longer tenure. Following is the list of all home loan tax benefits available with home loans –
Income Tax Section
Maximum Tax Deduction Allowed
Conditions To Avail
Rs. 1.5 Lakh
House property must not be sold until the completion of the first 5 years of possession.
Rs. 2 Lakh
The loan must be taken for the purchase/construction of the house, the construction of which needs to be completed within the first 5 years of the loan period.
The loan amount should not exceed Rs. 35 Lakh and the property’s value should be less than or equal to Rs. 50 Lakh.
Rs. 1.5 Lakh
Available to claim only in the same year when the stamp duty expenses have been incurred.
The stamp duty should not exceed Rs. 45 Lakh. No deductions are available under this section.
Deduction for Stamp Duty and Registration Charges
Alongside claiming the deduction for principal repayment, a deduction for stamp duty and registration charges can also be claimed as per Section 80C, but cannot exceed the limit of Rs 1.5 Lakh. It can be claimed only in the year these expenses are incurred.
Additional Tax Benefits for First-time Buyers
If this is your first time purchasing a residential property, then as per Section 80EE of the Income Tax Act, you are eligible to claim a tax deduction of up to Rs. 50,000 over and above Rs. 2 Lakh on the interest amount in a financial year for your home loan tax benefits. This additional benefit is only available against loans availed till March 31, 2017, who fulfill the below-mentioned eligibility criteria.
- The additional benefit is only available for residential properties worth up to Rs. 50 Lakh
- The availed loan amount should not exceed Rs. 35 Lakh
- The residential property should be the sole property owned by the borrower at the time of loan sanction. Also, the loan must be sanctioned by an HFC (housing finance company) or a financial institution.
Additional Tax Benefits for Joint Home Loan
If the home loan tax benefits have been taken jointly, then each loan holder is eligible for claiming a tax deduction of up to Rs. 2 Lakh on the amount paid as the home loan interest. Moreover, as per Section 80C of the Income Tax Act, each joint loan holder is also eligible for a tax deduction of up to Rs. 1.5 Lakh for the amount paid towards the repayment of the loan.
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