Introduction
Purchasing a home is often a costly affair and necessitates the need for a home loan. To make homeownership more accessible and encourage real estate investments, the Indian government has introduced various home loan rebates in the form of tax incentives and deductions. These deductions not only ease the financial burden on homebuyers but also promote the growth of the real estate sector in India. In this article, we will delve into the intricacies of home loan deductions, aiding you in optimising your home investment.
Various Deductions Linked to Home Loans
The housing loan interest rebate in income tax and home loan principal rebate are governed by the Income Tax Act, 1961. Here are some of the prominent deductions you can claim from your income if you are planning to buy a house on a home loan.
Section 80C Deduction
Under Section 80C of the Income Tax Act, 1961, you can avail deductions of up to Rs. 1.5 lakhs on the amount of principal repayment of your home loan for each financial year. This home loan principal rebate applies to both completed properties and properties under construction.
Section 24(b) Deduction
Section 24(b) of the Income Tax Act, 1961, allows for a deduction of up to Rs. 2 lakhs on the interest paid on a home loan for a self-occupied property. For properties that are not self-occupied (let out or deemed let out), there is no upper limit on the housing loan interest rebate.
Section 80EEA Deduction
Section 80EEA provides an additional deduction of up to Rs. 1.5 lakh as home loan interest tax rebate for first-time homebuyers. This is applicable only if the value of the property is up to Rs. 45 lakhs and the loan was sanctioned between 01 April 2019 and 31 March 2022. This deduction is in addition to the benefits under Section 24(b).
Benefits of Home Loan Rebates
Home loan interest rebate sections have always remained popular among taxpayers. Here are some of the significant benefits that home loan deductions garner for taxpayers:
Financial Relief
Home loan deductions provide considerable financial relief by reducing the overall income tax liability of the borrowers. This can lead to substantial savings over the loan tenure as both principal and interest components are eligible for deduction under various provisions of the income tax law.
Enhanced Affordability
The deductions make home loans more affordable as it directly reduces the cost of borrowing. This encourages individuals to invest in real estate and fulfil their homeownership dreams.
Boost to Real Estate Sector
The availability of tax benefits stimulates demand in the real estate market as taxpayers consider investing in the real estate sector contributing to its growth. As the deductions are available for both principal and interest, the taxpayers can claim deductions to the tune of Rs. 3.50 lakhs in a single financial year, channelising significant tax savings.
Long-Term Savings
Home loan deductions also help in long-term savings. Most people fall into the bracket of 30% tax. Home loans are long-term commitments ranging between 10 and 20 years. Thus, in the future, tax savings increase as the income grows as taxpayers have more taxable income to claim and set off home loan deductions against their income.
Summing Up
Home loans have been vital in helping people achieve their dream. The introduction of various deductions linked to home loans has transformed the landscape of real estate investments in India. These deductions not only alleviate your financial burden but also bolster the overall economy by promoting growth in the housing sector. If you are aspiring to buy your dream home, then you should leverage these deductions to maximise your savings. If you're seeking a home loan, visit Tata Capital to turn your dream of owning a home into a reality.
FAQs
Q1. What is the interest on the housing loan section in the Income Tax Act?
Section 24(b) of the Income Tax Act, 1961 allows for deductions on the interest paid on a home loan. Further, Section 80EEA also allows housing loan interest rebate for interest paid on home loans subject to the fulfilment of certain conditions.
Q2. Who is eligible to claim interest on a housing loan deduction under Section 24?
All individuals, whether self-employed or salaried, who have taken a home loan for a self-occupied or let-out property are eligible to claim deductions under Section 24(b).
Q3. Can I claim interest on a loan taken for any type of residential property?
Yes, you can claim a home loan interest rebate on a loan taken for any type of residential property. The property must be used for residential purposes, whether for self-occupation or renting out.
15 September 2023
4 mins read
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