Benefits of Home Loan: Avail Long-Term Tax Redemptions

01/03/2019

With easy repayment options along with flexible tenure offers by the leading banks and NBFCs, a common man’s desire to own a Home has become a reality. And thus, for anyone who wants to buy a dream home, a Home Loan is a practical requirement.

There is more to Home Loans than just increasing the ability of an individual to invest in a property; these loans also make them eligible for several tax benefits that can help them save a lot of money.

This article is a guide about the major Tax Benefits of Home Loan and it will help you assess your situation and find out if it is time to apply for a Home Loan.

Six Home Loan Tax Benefits
 

When it comes to Home Loan benefits, tax exemptions are the most sought after ones. Applying for major loans like Bajaj Finserv Home Loanor other options available can yield the 6 straight tax benefits:

#1.Benefits on the interest paid

There is the option of getting a loan to either buy a home or construct a home. In order to enjoy benefits on the interest paid on the amount, the construction of the property must be complete within 5 years of borrowing the loan. The EMI that is paid towards the loan has two components- one is the interest and the other is the principal repayment. According to Section 24 of the Income Tax Act, there is an option of claiming tax deductions of up to 2 lakhs on the interest paid on the Home Loan. If the property is rented out, however, no cap is placed on the tax benefits available on the interest that you pay during the financial year.

#2.Interest repayment during the Pre-construction period

This benefit is available to those who have applied for a loan to construct a property. Even when the property is under construction, the individual is liable to pay the EMI. In this case, it is not possible get a direct tax benefit on the interest that is paid. However, according to the law, the interest paid during the pre-construction period can be deducted in the form of five installments from the income of the individual. These installments are calculated from the time that the construction of the property is completed or until the property is acquired by the owner.

#3.Principal Repayment

According to Section 80C of the Income Tax Act, it is possible to avail tax benefits on the principal paid on any Home Loan such as PNB Home LoanTax deductions of up to 1.5 Lakhs are available in a financial year. It is important to remember that an individual is eligible for this deduction only if the property is not sold within five years of acquiring possession. If the property is sold, the deductions made earlier will the added to the income of the individual and the prevailing taxes will apply.

#4.For First Time Buyers

An additional deduction is available to first time home owners, provided the value of the property does not exceed the provided limit. In addition to that, there is a limit on the Home Loan amount applied as well. Individuals are eligible for these tax benefits only if he or she does not own any other property when the current loan was sanctioned.

#5.Joint Home Loan

For loans applied along with a family member or spouse tax benefits are applicable. All the tax benefits mentioned under Section 80 C and Section 24 are applicable to these Housing Loans. These benefits are extended to all the applicants of the loan. The maximum limit available on the benefits varies for Joint Loans. In addition to this, the applicants must be co-owners of the property.

#6.Stamp Duty and Registration Charges

According to Section 80C of the Income Tax, tax benefits are available on the principal repayment as well. There is a cap on the maximum deductions allowed in a financial year. These tax benefits are available only for the financial year when the individual has incurred the stamp duty and registration expenses. You can avail deductions of up to Rs.150000 per annum according to the provision in this section.

Home Loan Tax Benefits 2018-19

Each year the tax benefits offered on Home Loans change with the budget. The Tax benefits available on all Home Loans for the current financial year are as follows:

For First Time Home Owners

On Principal Repaid On Interest Paid
Principal up to Rs.1500000 or Rs.200000 for senior citizens can be claimed for tax deductions as per section 80C Benefits are offered on actual interest paid for a maximum amount of Rs.200000 and Rs.300000 for senior citizens provided the construction is complete within 5 years of taking the loan.   If construction is not complete in 5 years an exemption of Rs.30000 is available.     For loans up to Rs.35 Lakhs and properties valued up to Rs.50 Lakhs, additional exemption of Rs.50000 is available.

For First Home Vacant or Rented

On Principal Repaid On Interest Paid
Principal up to Rs.1500000 or Rs.200000 for senior citizens can be claimed for tax deductions as per section 80C only if the owner does not live in the same city. Benefits are offered on actual interest paid for a maximum amount of Rs.200000 or the actual interest paid on all the properties owned by the tax payer, whichever is lower.  

Second Home or Added Property

On Principal Repaid On Interest Paid
      None Benefits are offered on actual interest paid for a maximum amount of Rs.200000 or the actual interest paid on all the properties owned by the tax payer, whichever is lower.   

Under Construction Property

On Principal Repaid On Interest Paid
    None It is possible to claim the interest paid in the five equal parts in the financial years subsequent to the completion of the project or when the property has been handed over along with the annual limit of Rs.2 Lakhs.