Tax benefit Housing Loan

Tax benefit Housing Loan

Tax Benefits on Home Loan

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Taking a home loan can help you save tax as per the provisions of the Income Tax Act, 1961. Even more so after the announcements made during the latest financial budget.

Union Finance Minister Nirmala Sitharaman in the budget speech proposed to extend the deadline for availing additional deductions on interest payment on home loans to 31 March 2022. This comes after the government had in the previous budget extended the deadline to 31 March 2021.

While a can help you get a for yourself, it can also turn out to an expensive affair. But the various tax benefits that come with such a loan help you save money every year. Take a look at how you can make the most of these benefits.

Tax Benefits on Home Loan (FY 2021-22)

The following table gives you the tax benefits under the corresponding sections of the Income Tax Act, 1961.

New Updates (Union Buget 2021-2022)

Here are updates from the latest budget presented by Union Finance Minister Nirmala Sitharaman on 1 February 2021:

  • Eligibility period for claim of additional deduction for interest of Rs.1.5 lakh paid for loan taken for purchase of an affordable house extended till 31 March 2022.
  • Eligibility period for claiming tax holiday for affordable housing project extended by another year. The new deadline is 31 March 2022.
  • New tax exemption proposed for the notified Affordable Rental Housing Projects to promote supply of Affordable Rental Housing for the migrant workers.

Home Loan Tax Benefits under Section 80C – Principal Deductions

Section 80C deals with the principal amount deductions:

  • For both self-occupied and let-out properties, you can claim up to a maximum of Rs.1.5 lakh every year from taxable income on principal repayment.
  • Stamp duty and registration charges may be included in it. However, it can be claimed only once.
  • To claim it, you need to complete the construction of the property first.
  • You should not sell your within 5 years of possession to claim this deduction.
  • If you sell your within 5 years after possession, any deduction claimed will be reversed in the year in which you sell it. This amount will also be added to your income for the year of sale.

Tax Benefits under Section 80EE

  • Proposal has been made to increase income tax benefits by Rs.1.5 lakh on interest payments
  • You can avail deductions of up to Rs.3.5 lakh
  • The benefit can be availed over and above the existing exemption of Rs.2 lakh under Section 24(b)
  • The value of property must be less than Rs.45 lakh.

Deduction for Joint Home Loan

If the housing loan is availed by two or more persons, each of them is eligible to claim a deduction on the interest paid up to Rs.2 lakh each. Tax can be deducted on the principal paid as well for an amount up to Rs.1.5 lakhs each. However, all the applicants should also be co-owners of the property in order to claim this deduction. Therefore, a joint home loan can give you greater tax benefits.

Home Loan Tax Benefits of Owning a Second Property

As per the current provisions, tax benefits are applicable on payable interests. You can claim the entire paid interest amount.

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.

How to Claim Tax Benefits on Home Loans?

Claiming tax benefits on home loan is a simple process. Below are the steps to claim your tax deduction.

Step 1: Calculate the tax deduction to be claimed.

Step 2: Ensure that the is in your name or you are the co-borrower of the loan.

Step 3: Submit your home loan interest certificate to your employer to adjust the tax deductible at source.

Step 4: In case you don’t perform the above step, you would have to file the tax return by yourself.

Step 5: In case you are self-employed, you are not required to submit these documents anywhere. Just keep them handy if in case the IT department raises queries in the future.

How to Calculate Tax Benefits on Home Loan?

The easiest way to calculate your tax benefits on home loan is by using an online calculator. Simply enter your home loan details and click on calculate and a detailed tabulation will pop up. The details you will generally need are:

  • Loan Amount
  • Tenure
  • Interest Rate
  • Loan Start Date
  • Gross Annual Income
  • Existing Deduction Under 80C/D

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