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Only first-time home buyers are eligible to avail of benefits under section 80EEA. This means the borrower or the assessee should not own any flat, dwelling unit or residential property at the time of grant of the home loan. There is no deduction or exemption on the home loan principal amount. The upper limit for deduction against home loan interest is Rs 1.50 lakh per year. If the joint owners are also co-borrowers, they both are eligible to claim Rs 1.50 lakh each as deductions under section 80EEA, provided both meet all the other conditions. The assesses those who bought an affordable home, but are living in rented accommodations are eligible to claim deductions while claiming HRA benefits under Section 80GG.
Self-occupied property
Thus, borrowers will be able to claim a maximum income tax deduction of Rs. 7 Lakh. The property I purchased with a home loan is still under construction. Once it is completed, you can claim an aggregate of interest paid for the period prior to the year of taking possession. This can be claimed in five equal instalments from the year in which construction is completed. However, there is one thing that an individual must remember to claim this deduction.
Sec 24b of income tax act deals with the housing loan interest tax exemption. Maximum housing loan interest exemption limit under this section is up-to Rs.2 Lakhs per year. If the housing loan is availed by two or more persons, each of them is eligible to claim a deduction on the interest paid up to Rs.2 lakh each. Tax can be deducted on the principal paid as well for an amount up to Rs.1.5 lakhs each. However, all the applicants should also be co-owners of the property in order to claim this deduction. Now coming to the principal portion in the EMI paid during one financial year.
Tax benefits available through a home loan?
Yes, on 1st February, 2021, in the Union Budget 2021 government extended the additional tax deduction of Rs. 1.5 lakh on interest paid on home loan for the purchase of affordable homes until March 31, 2022. The process to claim tax benefits on a home loan is easy and simple. The pre-construction interest on housing loan can be claimed in equal instalments in next 5 financial years after having taken possession of the property. Additionally, if the borrower sells his property within 5 years of taking the possession of the property, he cannot claim the 80C home loan deduction.
To understand all these deductions in a much simpler way, you can have a look at the below table. Do you see yourself working for the same company for the next year or several years? At the very least, do you see yourself making roughly the same salary over the next several years? If not, you may want to hold off on buying a home and stick to renting.
Additional deduction under
1,50,000Property should not be sold within 5 years of possession.80CStamp DutyRs. 1,50,000Claim is allowed in the year of expense incurred.80EEInterestRs. 50,000Property Value should not exceed Rs. 50 lakhs and the loan amount should not exceed Rs. 35 lakhs.80EEAInterestRs. 1,50,000Stamp value of property should not exceed Rs. 45 lakhs and deduction u/s 80EE must not be claimed.
Taking a home loan can help you save tax as per the provisions of the Income Tax Act, 1961. Any family member, friend or even the spouse can be a co-borrower of ajoint home loanfrom Bajaj Finserv. The only condition is that every applicant of the housing loan must be a co-owner of that residential property. Income tax benefits under Section 80 EEA are available to those availing home loans in India under the PMAY CLSS scheme. The property should be acquired / constructed within 5 years from the end of financial year in which loan is availed (i.e. disbursed) by the borrower from the bank or financial institution. In case there is any delay in acquisition / construction of property beyond 5 years from the date of disbursement of loan then the benefit of interest on such self-occupied property shall be restricted to Rs.30,000 p.a.
A Quick Guide to Securing a Better Interest on Home Loans
Please see our Privacy Policy for more information and details on how to opt out. If you place it in service during 2021, the credit is 22% of the item’s cost with a limit of $500 on fuel cells. If you pay discount points when you take out your mortgage, you can deduct them, usually in the year you pay them .
Once added, the calculator runs its algorithm to give your income tax liability as well as savings. Considers all important factors like gross annual income, home loan interest rate, principal amount, home loan EMIs, existing tax implications, and deductions based on the financial year etc. Here is a look at the all the tax benefits that an individual can get on home loan EMI payments if he/she has opted for the old tax regime.
Post Budget 2020, taxpayers can opt for the new tax regime and pay lower interest without the benefits of various exemptions and deductions. Otherwise, one can opt for the old tax regime and claim deductions as applicable. The threshold drops to Rs.30,000 in case the 5-year period is exceeded. On the other hand, in the event that you have let out the property, you can claim the entire amount even if construction hasn’t been completed. The best way to calculate home loan tax benefits is to use home loan tax saving calculator. This automated tool makes the whole calculation process easy and hassle-free.
Previously, only one property could be considered self-occupied, and a second house was thought to be rented out, and therefore notional rent was computed and taxed as income. That’s why the government has given many home loan tax benefits to ease the burden. These benefits reduce the overall principal amount that you have to pay.
In case the property has been given on rent or falls under the category of deemed to be let out, the entire interest amount paid is waived off as a deduction. In this case, however, the tax payers can only offset losses of up to Rs 2 lakhs under the head income from housing property in a year. For example, suppose you have a home loan for construction and pay Rs 10,000 in interest each month. As a result, you can begin collecting the pre-construction interest of Rs 2.4 lakh only once the building is completed in five equal payments beginning in 2019. Section 24 limits the maximum interest deduction to Rs 2 lakh (including current year interest and pre-construction interest).
Under a co-borrower arrangement, the benefit of interest paid on a home loan can be availed by the borrowers subject to the condition that the house property is co-owned by both borrowers. While purchasing a dream house we always think and analyze whether to invest our own funds or avail housing loan. The selection between own fund and a housing loan is a matter of choice and depends on various factors such as the source of income, the purpose of buying a house, legal & tax aspects, fund availability, cost of the house, etc. Therefore, it is important for a buyer to understand all the aspects before making a choice between their own fund and a home loan. Your lender issues you a certificate each year, specifying the amount you pay every year as principal and interest component of the loan home.
Home Loan EMI Calculator
In case of self-occupied properties, senior citizens get a deduction of up to Rs.2 lakh under Section 80C and up to Rs.3 lakh under Section 24B. As per the Income Tax Act of 1961, you can get annual home loan tax benefit via both the interest and principal components of the loan. Premiums paid for a home loan protection insurance plan are tax deductible under section 80C of the Income Tax Act, 1961 only if the borrower makes repayment. Under specific circumstances, where the lender finances such an insurance plan and the borrower repays via loan EMIs, deductions are not allowed. The home loan tax benefit for under construction property is applicable only if the borrower has taken the loan for the purchase or construction of the property. The deduction is not applicable if the loan is taken for repairs/renovations/renewals/reconstruction of the property.
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