How do I get a tax break on my home loan?
The amount that can be claimed as a house loan interest deduction has been raised to Rs.2,00,000 from the previous maximum of Rs.1,000,000. As we’ve seen, this has the potential to save a lot of money in taxes.
To take advantage of the interest deduction on your home loan, you must go through four steps.
Table of Contents
- To take advantage of the interest deduction on your home loan, you must go through four steps.
- Gathering the necessary documentation is the first step.
- The completion date of the building or the date on which the land was purchased
- Information about the borrower
- Municipal taxes have been paid.
- Send these documents to the human resources department of your company.
- Calculating the amount of income a residential property generates
The interest on home loans deduction under Section 80 EEA will be extended to include loans made through March 31, 2022. Taxpayers will be able to claim the value of “two homes” as self-occupied, rather than the previous limit of one house.
Gathering the necessary documentation is the first step.
Obtaining information about the owner of the property
To be eligible for this deduction, you must be the legal owner of the property, which goes without saying. Calculate your share of the equity if you have a co-ownership in the property. Your percentage ownership of the property determines the amount of the deduction you are eligible to claim.
The completion date of the building or the date on which the land was purchased
The interest deduction can be claimed to begin with the year in which the property is finished being built. You may also be able to claim interest earned before the construction began. Pre-construction interest can be claimed in five equal installments, starting with the year of the purchase or the year of completion of the building and continuing until the house is sold.
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Information about the borrower
To be eligible for the deduction, the house loan must be taken in your name, that is, the name of the person who owns the property. As a co-borrower, you can also take part in the loan. The bank will give you a certificate with your interest and principal information on it.
Municipal taxes have been paid.
It’s worth noting that municipal taxes can only be deducted from home property income if they were paid in the previous calendar year.
Send these documents to the human resources department of your company.
It is your responsibility to notify your employer if you claim a home loan interest deduction so that your TDS can be adjusted appropriately. You won’t have to wait until the end of the year to figure out how much you owe in taxes and make any necessary adjustments. Make a point of informing your boss of the situation.
You are not required to submit these documents to anyone if you are a freelancer or self-employed; however, you will need them to estimate your Advance Tax obligation for each quarter. Any of these documents are not required to be submitted to the Internal Revenue Service (IRS).
Calculating the amount of income a residential property generates
The amount of interest that can be claimed as a deduction for a self-occupied house property is limited to Rs.2,00,000. The amount of interest that can be claimed in the case of let-out home property, on the other hand, is unrestricted. Beginning in the fiscal year 2017-18, home loan interest on the let-out property will be deducted only to the extent that the loss on such house property does not exceed Rs.2 lakhs. The procedures to follow in order to determine your revenue from house property are as follows.
The total monetary value of the property (nil in the case of a self-occupied property and Rental Value if rented) Municipal taxes paid less standard deduction (30 percent of net annual value, which is equal to the gross value less municipal taxes). The difference is equal to the difference between the income from house property and the interest deduction on a home loan.
Please keep in mind that if you use ClearTax to file your return, you will not be required to perform any of these calculations. You simply need to enter your information, and it will calculate the amount that will be used to calculate your real estate investment income.
Under section 80c of the Internal Revenue Code, claim the interest on a home loan deduction as well as the principal repayment.
If you make a Principal Repayment during the year (check your loan installment information), you might be able to deduct the interest on your home loan under Section 80 C of the Internal Revenue Code of 1986. In the current fiscal year, however, the total amount that can be claimed under Section 80C is limited to Rs 1,50,000.