Everybody wants to own a house. There is no better joy than living freely in one’s own house compared to a rented place. And these days, with the easy availability of home loans, owning a house even for the middle-class is no longer a utopian idea anymore.
Banks and financial institutions such as Tata Capital offer home loans upto 30 years. They are offering attractive interest rates starting at 9.25% and affordable housing finance schemes. So, if you want to take a home loan, in fact, it is just a click away at the websites of trusted and customer-friendly institutions such as Tata Capital.
Owning a house has a lot of perks. Firstly, it’s your own house so you have the liberty to stay as you wish. Secondly, you also save a lot of tax when you take a home loan. Can you imagine saving on taxes while availing a housing loan? This sounds like a good deal doesn’t it? Three sections of the Income-Tax Act that cover tax gains under house property – 80C, 24B and 80 EE.
Under this section, the amount paid as repayment of the principal amount of a home loan by a person is allowed for a tax deduction. The maximum tax benefit allowed currently is Rs 1,50,000. This includes amounts invested in PPF account, tax-saving fixed deposits, equity-oriented mutual funds, National Savings Certificate, and Senior Citizens’ Saving Scheme. You must, however, remember that the tax benefit under this section is allowed only after the construction of the house has been completed and the completion certification has been received by the taxpayer.
For every housing finance option or home loan, there is a principal component, and an interest component. Section 24B deals with tax benefits that one gets on interest paid by an individual on his home loan. The maximum tax benefit allowed for a self-occupied property is Rs 2 lakh. The home loan can be taken for various purposes — construction, reconstruction, repair, renewal, or purchase of a residential property. If the property for which the housing loan is taken is not self-occupied or rented out, no maximum limit has been prescribed and the whole loan interest can be claimed for deduction. Also, if the property is not constructed within five years (the financial year 2016-17 onwards) from the end of the financial year in which the home loan was taken, then the interest benefit will be reduced from Rs 2 lakh to Rs 30,000.
Section 80 EE:
This section is especially for first-time buyers as it covers income tax rebate on interest on housing loan for first-time buyers only. It provides an additional deduction of Rs 50,000 over and above the tax deduction of Rs 2 lakh under section 24B, and Rs 1.5 lakh under section 80C. This deduction can be availed of from the financial year 2016-17 onwards. The home loan must have been sanctioned between April 1, 2016, and March 31, 2017, for one to be able to claim a deduction under this section. But you must remember that deduction under this section is allowed only if the value of the property purchased is less than Rs 50 lakh, and the value of the loan is less than Rs 35 lakh. The benefit will be available for the entire time till the home loan is repaid.
As you can see, buying a house by taking home loans actually saves a lot of tax under different sections. Be judicious and avail all these deductions, so your home loan will be doubly beneficial to you.