Home Loan Tax Benefits

Everybody wishes to own their “Dream Home,” but this wish requires a determined endeavor to become a reality. As online loan facility advances with technology, home loans have become a trending affair. Furthermore, one can even enjoy several easily available tax benefits of home loan with just a click. Read on to find out everything that you must know about home loans and home loan tax benefits!

First Off, What is a Home Loan?

A home loan is a sum of money borrowed from a lender to purchase a property (which can be either a residential flat or a piece of land) which is kept as collateral till the loan gets cleared by the lender. The lender covers up to 90% of the cost involved in buying a property, while the remainder has to be paid as a down payment in a lump sum. It offers this amount to be paid at reasonable interest rates for a long tenure. There are EMI schemes through which one can choose to repay the loan.

Why Should You Take a Home Loan?

Getting a home loan comes with a sentimental value of self-accomplishment plus a set of benefits as follows:

• Low-Interest Rates – As mentioned earlier, a home loan levies low and convenient interest rates. Furthermore, a home loan is a long-term (say 10 or more years) affair that needs to be managed effectively with the ups and downs of the interest rates. The lower interests would ensure that the installment amount never jumps up to inconvenient numbers and, therefore, help repay the loan faster.

• Small Installments – Home loans put less pressure on your pocket because the installments are small and easy to manage. The only time you would need to pay in a lump sum, is the down payment sum to the builder at the time of construction.

• Long Repayment Tenure – Home loans give you the leisure to pay the entire loan in small over a long period of time. The repayment tenure can be as long as 10-15 years to pay the home loan.

• Tax Benefits – There are several home loan tax benefits that you can avail yourself of, with your home loan. Below, we have discussed them in detail.

Benefits of Home Loan in Income Tax:

A home loan is a good source to lighten your tax burden for a longer tenure. Following is the list of all home loan tax benefits available with home loans –

Deduction	Income Tax Section	Maximum Tax Deduction Allowed	Conditions To Avail
Principal	80C	Rs. 1.5 Lakh	House property must not be sold until the completion of the first 5 years of possession.
Interest	24B	Rs. 2 Lakh	The loan must be taken for the purchase/construction of the house, the construction of which needs to be completed within the first 5 years of the loan period.
Interest	80EE	Rs. 50,000	The loan amount should not exceed Rs. 35 Lakh and the property’s value should be less than or equal to Rs. 50 Lakh.
Stamp Duty	80C	Rs. 1.5 Lakh	Available to claim only in the same year when the stamp duty expenses have been incurred.
Interest	80EEA	Rs. 1.5 Lakh	The stamp duty should not exceed Rs. 45 Lakh. No deductions are available under this section.

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Home Loan Tax Benefits

Home Loan Tax Benefits under Section 80C:

Under section 80C, you can make a maximum claim of Rs 1,50,000 on principle. This can be availed for rental properties as well as self-occupied properties.

Conditions:

• A fully constructed property is required in order to claim it.
• If you are planning to sell your property within 5 years of your possession, then you can’t claim it.
• The claim also includes stamp duty and registration fees. It can be claimed only once.

Home Loan Tax Benefits under Section 24:

• You can avail of a deduction of interest from taxes that you paid on a home loan.
• These deductions come under section 24(b) of the Income Tax Act. 
• If you own two homes, your tax deductions from both can’t exceed Rs. 2,00,000 in a particular financial year.
• If you rent out your house, then you can claim the entire amount of interest paid for purchase, construction, or reconstruction as a deduction.

Home Loan Tax Benefits under Section 80EE:

First-time buyers can avail of the benefits under section 80EE:

• You can only avail of the deduction if the value of acquired property is less than Rs. 50 Lakhs, and the loan amount is less than Rs. 35 lakhs.
• The deduction is only available as long as the loan continues.

Home Loan Tax Benefits under Section 80EEA:

Your interest in the home loan is eligible for an additional deduction of Rs. 1.5 Lakh. In order to avail of the benefits under 80EEA, make sure you fulfill the requirements below:

• For a residential home, your loan must be sanctioned by a financial institution or housing finance company.
• You should be a first-time buyer. At the time of loan sanction, you shouldn’t possess any residential property under your name.
• The stamp duty value should be less than Rs. 45 Lakhs.
• If you jointly own a residential property with your partner and pay the loan jointly, you both can claim this deduction.
• Both residents and non-residents can take benefits under Section 80EEA.
• Specifically it is not mentioned in the section that you need to self-occupy a residential property. In other words, you don’t need to possess a residential property to claim deductions under this section

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Deduction for Stamp Duty and Registration Charges

Alongside claiming the reduction for principal repayment, a reduction for stamp duty and registration charges can also be claimed as per Section 80C but cannot exceed the limit of Rs 1.5 Lakh. It can be accessed only in the year these expenses are incurred.

Additional Tax Benefits for First-time Buyers

If this is your first time purchasing a residential property, then as per Section 80EE of the Income Tax Act, you are eligible to set a tax deduction of up to Rs. 50,000 over and above Rs. 2 Lakh on the interest amount in a financial year for your home loan tax benefits. This additional benefit is only available against loans availed till March 31, 2017, who fulfill the below-mentioned eligibility criteria.

• The additional benefit is only available for residential properties worth up to Rs. 50 Lakh.
• The availed loan amount should not exceed Rs. 35 Lakh.
• The residential property should be the sole property owned by the borrower at the time of loan sanction. Also, the loan must be sanctioned by an HFC (housing finance company) or a financial institution.

Additional Tax Benefits on Home Loan for Joint Owners

If the home loan tax benefits have been taken jointly, then each loan holder is eligible to set a tax deduction of up to INR 2 Lakh on the amount paid as the home loan interest. Moreover, as per Section 80C of the Income Tax Act, each joint loan holder is also eligible for a tax reduction of up to Rs. 1.5 Lakh for the amount paid towards the repayment of the loan.

How to Calculate home loan benefits in income tax?

You can use the home loan income tax benefits calculator to calculate your tax benefits. All you need to do is provide some information and click on calculate, and you can get all the information. What you need to do is enter

• Loan Amount
• Interest Rate
• Tenure
• Start Date of the loan
• Gross Annual Income
• Existing deduction under 80C/D

Take Away

Many people are unaware of these tax benefits, but we think it is important to try and save your money where you can when it comes to paying taxes. We hope that this blog post helps you prepare for your next home purchase by helping you identify what tax deductions you can take advantage of to save your money. 

Now, if you are thinking about where you should get your home loan or which bank could give you a loan with an interest rate that you want, we have a solution for you; OneNDF.

OneNDF provides high-end technology solutions to match customers with the right lender from a pool of 99+ leading banks and NBFCs for their specific home loan requirements by connecting them directly with the latter. It also makes use of advanced analytic techniques to assess borrowers’ debt potential in minutes and help you get your required loan amount. OneNDF serve as an end-to-end debt solution that processes your loans at a 5X pace as compared to traditional platforms, along with the lowest processing fee.

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