Owning a home is a dream for many, but did you know that it can also offer significant tax benefits? At Eazy Startups, we specialize in helping individuals maximize their tax savings, whether it’s through filing GST returns or Income Tax Return India. In this blog, we’ll explore how you can leverage a home loan to unlock valuable tax benefits and save money come tax season.
- Deduction on Interest Payment
- Prinicipal Repayment Deduction
- Joint Home Loan Benefits
- Additional Deductions for First-Time Homebuyers
- Tax Benefits on Under-Construction Properties
Deduction on Interest Payment:
Homeowners can benefit from a tax deduction on interest payments for their home loan. Under Section 24 of the Income Tax Act, in India, homeowners can claim a deduction of up to Rs. 2 lakh per year on interest paid for a self-occupied property. There is no cap on the deduction amount for properties rented out or deemed to be let out. This tax benefit allows homeowners to lower their taxable income and reduce their overall tax liability.
Principal Repayment Deduction:
Homeowners have another option to decrease their taxable income in addition to the deduction on interest payments. They can also claim a deduction on the principal repayment of their home loan under Section 80C of the Income Tax Act. This deduction has a maximum limit of Rs. 1.5 lakh per year, including the principal amount repaid towards the home loan, stamp duty, and registration charges paid during purchase. By taking advantage of this deduction, homeowners can save on taxes and lower their taxable income even more.
Joint Home Loan Benefits:
If you’ve taken out a home loan jointly with another individual, such as your spouse or family member, you can claim tax benefits on the loan repayment. Each co-borrower can claim deductions on the interest and principal repayment amount up to the prescribed limits mentioned earlier. This can effectively double the tax benefits available to homeowners and maximize savings for both parties.
Additional Deductions for First-Time Homebuyers:
For first-time homebuyers, additional tax benefits are available under Section 80EEA of the Income Tax Act. This section allows for an additional deduction of up to Rs. 1.5 lakh per year on the interest paid towards the home loan, provided certain conditions are met. To qualify for this deduction, the loan must be sanctioned between April 1, 2019, and March 31, 2022, and the stamp duty value of the property must not exceed Rs. 45 lakh. By leveraging this deduction, first-time homebuyers can enjoy even greater tax savings.
Tax Benefits on Under-Construction Properties:
Homebuyers who have taken out a loan for an under-construction property can also avail of tax benefits on the interest paid during the construction period. The interest paid during the construction period can be claimed as a deduction in five equal installments starting from the financial year the construction is completed. This can help homeowners manage their tax liabilities more effectively during the construction phase and maximize their overall tax savings.
Final Words
Taking out a home loan can offer significant tax benefits and help homeowners save money on their taxes. Individuals can maximise their tax savings and enjoy greater financial security by leveraging deductions on interest payments, principal repayment, joint home loans, and additional benefits for first-time homebuyers and under-construction properties. At Eazy Startups, we’re here to help you navigate the complexities of tax planning and filing, whether it’s for GST returns or Income Tax Return India, or maximizing tax benefits with a home loan. Contact us today to learn more about how we can assist you with your tax-related needs.