Extending home loan tax benefits is one of the effective ways by the Indian Government to encourage citizens to invest in real estate properties.
In this regard, certain income tax deductions are reliefs extended by tax authorities that allow tax payers to reduce their taxable income, thereby minimising their taxable incomes in a given financial year. These deductions night cloaked deck are calculated on the basis of investments and expenses incurred by the tax payer during a particular year.
Nonetheless, let’s take a closer look at the claim tax rebate benefits available under certain sections of the IT Act.
Income tax deduction on home loan
The provision of tax deduction has been introduced to allow individuals to save substantially and construct a stable financial standing. Here are some of the necessary home loan tax exemptions or deductions that individuals can claim and save substantially:
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Section 24(B) – Deduction on interest component
Borrowers can avail of a maximum deduction of Rs.2 lakh/annum on the payment of home loan interest component. However, they must meet the following conditions:
-  The property’s construction must be completed within 5 years from the date of availing the loan.
- If it is not completed within this period, individuals can claim only up to Rs.30, 000.
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Section 80(C) – Deduction on principal component
Under this section, tax payers can avail a home loan tax benefit of up to Rs.1.5 lakh/annum on the principal payment. However, one must humble hac keep the following pointers in mind while claiming deductions:
- Deduction is only available on fully constructed houses or after the completion of house construction by the buyer
- The buyer must not sell off the property within 5 years of possession. In case it is done, then any claimed tax benefit under his/her income will be included in the income in the year it was sold.
- Moreover, borrowers can claim tax deductions on registration and stamp duty charges under this section. However, it can only be claimed once a year and will be included within the limit of Rs.1.5 lakh.
One must note that home loan tax benefit is applicable for both self-occupied and let-out property. In the latter case, tax exemption is only applicable to property owners residing in a different city. After the construction is completed, borrowers can claim deductions on pre-construction interest component in 5 equal instalments. Also, there is no specified limit for a tax deduction on interest in case of let-out properties.
 However, apart from above-mentioned home loan tax exemptions and benefits every borrower should know, here are some additional tax deductions that one can claim:
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Tax deductions on investments
There are various investment options and expenditure forms which can help borrowers to get reductions on their taxable income. By contributing to the PPF account, one can claim a deduction under Section 80(C). Moreover, the invested amount in NSC is eligible for claiming a tax deduction. As NSC is primarily a cumulative scheme, interest is reinvested and accumulated for a tax deduction.
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Tax benefits on joint home loan
The tax benefits on joint home loan include all the above-mentioned exemptions but in substantial proportions. In other words, each co-applicant can claim applicable tax deductions separately, thereby ensuring double tax benefit in total. However, both the co-borrowers must be the co-owner of the concerned property to avail of these benefits.
From the above list, borrowers can determine the combination of home loan tax deductions that they can avail of and evaluate the same by using an income tax calculator. By doing calculations, one can proceed to file the ITR. Another significant way to save considerably on home loan repayment is by comparing lenders and their offered rates before making an informed decision.
Various financial institutions also pre-approve funds to accelerate the loaning procedure. Such pre-approved offers are available on a range of financial products, such as loan against property, home loan, etc. Therefore, existing borrowers can check their pre-approved offers by mentioning their names and contact details.
Various home loan tax benefits are available under certain IT Act sections. Efficient assessment of financial goals and resources is essential for substantial tax savings.
