- May 26, 2021
- News
Everything you need to know about home loan tax breaks.
There are several compelling reasons to own a home! You get to live in a home that you can genuinely call your own, home loan, paint the walls with your imagination, and establish long-lasting ties with a lovely community. But did you know that there is another significant benefit to purchasing a home in India today? Mortgage interest deductions are tax-deductible.
That’s correct. The government is aggressively attempting to encourage more individuals to own homes, and those who do so are rewarded with significant tax incentives. You are entitled to tax deductions under several provisions under Section 80C of the Income Tax Act and the new GST provisions. Let’s take a closer look at each of them.
– Deduction for housing loan interest:
If you took out a home loan to buy or build a house, you are entitled to a tax deduction for the interest paid on the loan. If you pay back your loan in EMIs, this payment consists of two parts: a principal amount and an interest amount. This interest will be tax deductible up to a maximum of Rs. 2.5 LAKHS. You can begin claiming this interest from the year your residence is finally purchased or built.
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Deduction for housing loan interest paid during pre-construction:
Assume you have purchased a house that is still under construction and will take some time to move in. But you’ve already taken out a home loan and begun making payments on it, even if the house isn’t finished yet. Will you still be able to deduct interest under the present laws? You will, indeed.
The Income Tax Act includes unique provisions in this scenario, allowing you to receive a tax credit on house loans up to Rs. 2 lakh for pre-construction interest amounts. This interest is deducted in five equal payments under the clause. However, the top limit in this scenario is also 2 lakhs.
Deduction on principal amount:
As previously stated, you are entitled to a tax deduction not only on the loan interest amount but also on the principle amount under Section 80C of the Income Tax Act. People are more likely to invest in a new house if they are motivated to do so. You are entitled to a discount of up to Rs. 1.5 lakhs per year under this clause.
One prerequisite for receiving home loan tax benefits in this state is that you do not sell the residence for at least 5 years. If you do, you will lose your eligibility and be taxed for it. It will immediately return to your income, and you will get no advantages.
Deduction for shared house loan:
In recent years, joint house loans have grown in popularity. With salaries increasingly being distributed evenly between both couples, getting a combined home loan for a new property is a great idea. Under this provision, each partner can claim up to Rs.2 lakh in interest and up to Rs.1.5 lakh in principal, as well as a home loan tax exemption.
Both couples must, however, be co-owners of the property. Deductions on combined home loans are extremely beneficial to families looking to purchase a new home. When you take out a shared house loan, you save significantly more.
Deduction for registration fees and stamp duty:
You can deduct these fees only in the year in which you took out the loan. This arrangement allows you to deduct up to 1.5 lakh in taxes. If a property is acquired in a joint venture, the co-owners can deduct these expenditures in proportion to their ownership stake in the property.
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Section 80EEA – Additional deduction:
If the stamp value of your property does not exceed Rs.45 lakh, you are entitled to a home loan tax rebate under Section 80EEA of the Income Tax Act. The loan must be approved between April 1st and March 31st, and it is deductible up to Rs.1.5 lakh. Furthermore, you should not own any other property at the time of loan approval. In addition, you should be ineligible for a tax deduction under Section 80EE.
These are the primary tax breaks available when purchasing a new home. Isn’t that wonderful? Not only do you have access to low-interest home loan options, but you also have excellent housing loan tax advantages when investing in a new house. With all of these advantages at your disposal, purchasing a home at a younger age will offer you much-needed financial stability in today’s uncertain market.
Furthermore, the Pradhan Mantri Awas Yojana, or PMAY, which was announced by the government in 2015, intends to stimulate increased investment in the housing industry by offering financial help from the federal government to potential house purchasers. Several banks and banking organizations have also used PMAY to help Indians afford houses.
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