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In the ever-evolving financial landscape, it is imperative for individuals and businesses to stay informed about the tax incentives available to them. One such avenue that has garnered significant attention in recent times is Section 24(b) of the Income Tax Act. This section provides tax reliefs, especially in the context of home loans, making it beneficial for those looking to purchase property. In this article, we delve into the intricacies of Section 24(b), the opportunities it presents and the latest trends in business loans.
At its core, Section 24(b) of income tax addresses the deductions available on interest payments made on capital borrowed for acquiring or constructing a house property. While the main essence is straightforward, the details and implications are more intricate:
Purpose of Borrowing: This section applies to loans taken for buying or constructing a house. Additionally, it also covers loans borrowed for the repair, renewal or reconstruction of an existing property.
Benefit to Taxpayers: When a taxpayer avails a home loan, a significant portion of their EMI payments during the initial years goes towards the interest. Section 24(b) home loan interest allows taxpayers to claim a deduction on this interest, thus effectively reducing their taxable income.
Type of Property: The benefits under Section 24(b) deduction are not limited to just self-occupied properties. Home loan interest 24(b) also extends to properties that are vacant or let out. This inclusive approach acknowledges the diverse ways in which individuals utilise their properties – whether as their primary residence, left unoccupied for various reasons or rented out for rental income.
The deduction under Section 24(b) is not universally available to all taxpayers but is specific to certain scenarios:
First-time Home Buyers: Those venturing into homeownership for the first time with the support of a home loan can avail of this deduction. This deduction acknowledges the challenges faced by first-time buyers and endeavors to support them as they embark on their homeownership journey.
Existing Homeowners: Homeowners looking to renovate, extend, or repair their existing property by borrowing funds can also benefit from this section. When they borrow funds for these purposes, Section 24(b) continues to be advantageous. By permitting a deduction on the interest paid for such loans, the provision recognises the importance of maintaining and improving existing properties.
Joint Home Owners: Properties with co-owners can be a boon when both owners have separate loan agreements. Both co-owners can individually claim this deduction, provided they are co-borrowers as well and are paying the EMIs. Therefore, this arrangement not only recognises the individual contributions of co-owners but also encourages a cooperative approach to property ownership while simultaneously providing tax relief to both parties.
The quantum of deduction under Section 24(b) varies based on specific conditions:
Self-Occupied Property: If the borrower resides in the purchased or constructed property, the maximum deduction available on the interest of the home loan is Rs. 2 lakh annually.
Example: Raj takes a home loan to buy an apartment where he decides to live. If the interest he pays on his loan in a year amounts to Rs. 2.5 lakh, he can claim a deduction of only up to Rs. 2 lakh under Section 24(b) interest on a housing loan.
Let-out or Deemed Let-out Property: For properties that are rented out or deemed to be rented out, the entire interest paid on the home loan can be claimed as a deduction, with no upper limit.
Example: Ananya has a second home that she rents out. She pays an annual interest of Rs. 3.5 lakh on its home loan. Ananya can claim the entire Rs. 3.5 lakh as a deduction.
Delayed Construction or Acquisition: If the property is not constructed or acquired within 5 years from the end of the financial year in which the loan was taken, the deduction limit gets reduced to Rs. 30,000.
Example: Suresh took a home loan in April 2018 for a property. However, the construction was completed only in October 2023. Instead of the usual Rs. 2 lakh deduction, he can only claim Rs. 30,000 under Section 24(b).
Pre-Construction Interest: If you have borrowed money to buy or build a house, you might have paid some interest before the construction was finished, which is your “pre-construction interest”.
This deduction is not for loans taken for house repairs or reconstruction. The maximum deduction you can claim in a year, including this interest, is Rs 2 lakh. You can claim this interest over 5 years, starting from when the house is bought or built.
Owning a home is not just about having a personal space, it is also about making financially sound decisions. Utilising the tax benefits from house property income can significantly lighten the financial load. These benefits, coupled with the right financial partner, can make your home-buying journey smooth and rewarding.
Tata Capital’s Home Loan offers are designed with this in mind. With their competitive interest rates, transparent processes and customer-centric approach, Tata Capital ensures that your dream of homeownership becomes a reality.
Therefore, as you navigate the intricacies of the housing world, remember that the right knowledge and the right partner can make all the difference.
Policies, Codes & Other Documents