Table of Content
The Stamp duty value of the flat, dwelling unit or residential property shall not exceed Rs 45 lakh. However, to avail of the deduction of section 80EEA, the assessee must be an individual and the interest is payable on the loan taken by him. The housing loan must be taken from any financial institution, bank or housing finance company to buy an affordable flat, dwelling unit, or residential house property.
Further, the Home Loan borrower can avail of under construction property tax benefits and save more money. Even more so following the declarations made during the most recent fiscal budget. In her budget statement, Union Finance Minister Nirmala Sitharaman suggested extending the deadline for claiming extra deductions on house loan interest payments until March 31, 2024. This comes after the administration extended the deadline in the previous budget to March 31, 2022.
Self-occupied property
Amy Fontinelle is a leading personal finance expert with nearly 15 years of experience. You can connect with Amy on Twitter (@AmyFontinelle) or learn more at her website, AmyFontinelle.com. By providing my email I agree to receive Forbes Advisor promotions, offers and additional Forbes Marketplace services.
Yes, home loan principal is part of Section 80C of the Income Tax Act. Under this section, an individual is entitled to tax deductions on the amount paid as repayment of the principal component on the housing loan. An amount up to Rs.1.50 lakh can be claimed as tax deductions under Section 80C. Generally, tax benefits can be availed only on the house claimed as self-occupied.
Tax benefits available through a home loan?
Therefore, a home loans is providing additional tax-saving options to the purchaser of house. However, the borrower needs to be very mindful of conditions prescribed under each section and documents required to substantiate the tax benefit availed under each section. Section 24 allows home buyers deductions of up to Rs 2 lakhs in a year towards interest payment.
Certain investments also allow you to claim a deduction under Section 80C. However, the total limit of all deductions is capped at Rs.1.5 lakh per financial year. The tax relief obtained via this section reduces your net taxable income. Assuming that your gross annual income is Rs.5 lakh and you get full home loan tax benefits of Rs.1.5 lakh, your taxable income becomes Rs.3.5 lakh. It is not easy to understand how tax deductions work in the case of under-construction properties.
Additional deduction under
Even if that is not the case and there is some scope for the tax payer to claim benefits towards home loan principal payment, it would be quite limited. To get additional tax rebates of up to Rs. 1.5 lakh under Section 80 EEA, you have to be a first-time homebuyer. Moreover, the stamp value of their property must not exceed Rs. 45 lakh. If you are self-employed, you do not need to submit these documents to claim your home loan tax deductions.
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
Remember that this limit is also competed for by other tax-saving instruments like EPF, PPF, life insurance, etc. So if you take one home loan, the limit is Rs 1.5 lakh for the principal repayment tax rebate. Even if you have a second home loan, the maximum deduction for principal payments will still be Rs 1.5 lakh. We have already discussed the tax exemptions available on the types of properties owned by the borrower. Let’s illustrate with a hypothetical situation- if the borrower is staying on rent and has also booked a property availing a housing loan from the bank.
Install the Navi app now and get instant in-principle approval right away! A 1031 Exchange stipulates that a property owner can sell a property and invest that profit into another like-kind property. The new property must be used to run a business or for some other productive activity. Another appealing reason to buy a home is to sell it for a profit several years down the road. Assuming that you got a good deal on your home and the housing market stays relatively stable, you can sell your home for as much as $50,000 or more in profit just a few years after you buy it. It doesn't make sense to buy a home if you aren't sure that you will still be in the area over the next five years.
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.
If the construction of the property is not completed within the 5 years then the housing loan interest tax benefit will be restricted to Rs.30,000/- in a year. If the borrower owns more than two properties, he can claim any of the two houses as self-occupied and claim aggregate deduction on the principal repayment up-to Rs.1.5 Lakhs per year. You can deduct state and local property taxes in the year you pay them. This deduction is limited to $10,000 per year ($5,000 if married filing separately) and falls under the same umbrella as sales taxes and state and local income taxes.
It has been proposed that the second self-occupied home can also be claimed as a self-occupied one to help borrowers save more on taxes. You should not sell your house within 5 years of possession to claim this deduction. The following table gives you the tax benefits under the corresponding sections of the Income Tax Act, 1961. In case the entire amount of interest on a home loan is claimed as a deduction under section 24 of the Act, then the additional benefit of interest shall not be available under section 80EE of the Act.
If the interest rate is above 5 percent, you may want to wait until they come back down. This calculator will help you to estimate the tax benefits of buying a home versus renting. To be eligible for this deduction, they must also be co-owners of the property lent. As a result, taking out a loan with your family can help you claim a higher tax benefit. Section 80C allows a deduction for the principal component of the EMI paid for the year. However, in order to claim this deduction, the residence must not be sold within five years of occupancy.
This helps in saving you from spending extra money than you had initially planned for. As per the new income tax rule, starting April 2022, no new home loans sanctioned in FY23 will be eligible to claim the tax benefits under section 80 EEA, seeing as the tax benefits period has lapsed. Note 2 – If you have purchased a property and taken home loans jointly, then you need to be careful with the tax benefits you claim. Income tax section 80EEA provides the additional home loan interest tax rebate on PMAY-CLSS schemes for up-to Rs.1.5 Lakhs per year to the borrower, over and above the interest-income tax rebate on housing loan of section 24b. Given below are the prerequisites to avail this additional benefit of 80EEA income tax. In case of joint home loans availed by the borrower, both borrower and co-borrower can apply for tax rebate on home loan interest for up-to Rs.2 Lakhs/ Rs.30,000/- each in every financial year for self-occupied property.
No comments:
Post a Comment