In today's real estate market, banks have started playing a crucial role in laying out loans to property buyers. Generally, every individual has the dream of owning a home to kick start a modern lifestyle or earn a steady income from it. However, not all investors can readily invest in the properties they want. In such a circumstance, investors can choose the right home loan which offers plenty of benefits provided by standard banks. Go through this blog to know more about tax benefits on a home loan that is applicable in our country.
A home loan is one of the prominent tax-saving instruments that includes both the principal and interest amount repayments. To avoid financial chaos while investing in a property, the government announces various tax benefits under the Income Tax Act of 1961. Homebuyers can avail tax benefits under Income Tax section 80C and section 24B. Even if you are capable of owning a home with your savings, it is still better to avail a home loan, mainly to save on taxes.
Tax deduction on principal repayment: Under the Income Tax Section 80C, the maximum amount that can be claimed per financial year is up to Rs.1.5 lakh on the principal repayment. Know that you can avail this tax deduction only after the construction of the building is completed.
Tax deduction on home loan for homes under construction:If you are planning to make an investment in an 'under-construction' property by taking a home loan, you can avail deduction under the Income Tax Act. A homebuyer can have the deduction on interest from the year of owning the home or after the construction is completed.
Tax deduction for stamp duty & registration charges: Apart from deduction in principal repayment, you can also avail deduction for stamp duty and registration charges under section 80C. Note that this tax benefit can be claimed only when the expenses are made.
Tax deduction on processing fee: Did you know you can have a tax deduction on the processing fee of a home loan? Yes, under the Income Tax Act - Section 2(28a), the deduction on interest payable for the home loan obtained includes processing fee covered as a service fee.
Tax deduction for first time homebuyers: If you are a first-time homebuyer, you have added tax benefit on claiming home loan. Most banks offer a specific deduction on the home loan every year until the tenure gets over.