The Best Time to Claim Tax Benefits on a Home Loan is Now. Check Out How.
With the latest innovations in the field of lending and borrowing, applying for a loan has become easier than ever before. As our dreams are myriad, so are the loans offered by Indian lenders.
Out of the various types of loans, a home loan is the most popular, simple, and cost-effective. It is because a home loan allows you the advantage of claiming unparalleled tax rebates. While a home loan calculator gives you every figure that matters, it does not lay down the tax benefits that a home loan offers.
Read this article to know the tax rebates you can get when you are applying for a home loan from a reputed lender like PNB Housing Finance.
How Can You Claim Tax Benefits on a Home Loan?
When you enter your details on a home loan calculator, it will show you a summary of the payments you are required to make through the loan term. The EMI component is divided into two parts - principal and interest. Different provisions of the Income Tax Act, 1961, allows you to claim tax rebates on the principal, as well as the interest.
What are the Tax Rebates on a Home Loan?
The Income Tax Act allows you to claim tax benefits, as a first-time homebuyer, under three sections - Section 80C, 24B, and 80EEA. The total tax benefits you can avail under various provisions are INR 3.5 lakh on the interest component and INR 1.5 lakh on the principal component of your home loan EMI.
Take a look at how much you can save under each provision of the Income Tax Act.
1. Section 80C
Under this section, you can claim tax benefits of up to INR 1.5 lakh in a financial year. This provision applies to the principal component of your home loan EMI. You may also include the registration charges and stamp duty while computing the tax rebate under this section.
2. Section 24B
This section of the Income Tax Act allows you to avail tax rebates of up to INR 2 lakh on the interest component of your home loan EMI. You can also claim tax rebates if your house is under construction. However, there is a gap of five years, within which the construction needs to finish, for claiming the tax benefits. If the construction does not finish within five years, you can claim only INR 30,000.
3. Section 80EEA
This section of the Income Tax Act applies to first-time individual home buyers. You can avail tax rebate of up to INR 1.5 lakh on the interest component. This is in addition to the rebate under Section 24B. However, to claim benefits under this section, the property's stamped value should be below INR 45 lakh. Remember that a borrower claiming tax benefits under this section cannot claim tax benefits under Section 80EE.
What is Section 80EE?
Section 80EE allows you to claim tax rebates of up to INR 50,000 in a financial year, over and above Section 24B. Like Section 80EEA, this is applicable for first-time home buyers. You can claim tax rebates under this section if the loan value is less than INR 35 lakh, and the property value is less than INR 50 lakh. However, if you claim tax benefits under this section, you cannot avail of tax deductions under Section 80EEA.
Conclusion
A home loan is the best way to fulfil your dream of having a shelter of your own. Use a home loan calculator now to see how much you can save on a home loan.
