Homebuying is an umbrella process that includes various steps like site visits, paperwork, legal due diligence, home loan processing, etc., under it. Throughout this process, as a homebuyer, you are likely to spend more than what you prepared for. However, this process is not all thorns and no roses. Here are some tax benefits on home loans that we suggest you can avail upon eligibility:
Home loan Tax Benefits on Principal amounts: The tax benefits allowed as deduction under Section 80C towards the repayment of home loan’s principal amount is capped at a maximum claim of Rs 1.5 Lakhs. This benefit can be availed only once, however, it will include stamp duty and registration charges.
To claim this deduction, the residential property must not be sold within five years of possession. The deduction claimed earlier will otherwise be added back to your income in the year of sale.
Nonetheless, co-borrowers can severally claim a deduction of maximum Rs 1.5 Lakhs towards repayment of the principal amount under Section 80C of the Income Tax Act, 1961.
Home loan Tax benefits on Interest amounts: In addition to the exemption of Rs 2 Lakhs per annum available under Section 24 of the Income Tax Act, 1961, if you are an individual paying off a housing loan, you are allowed deduction in the interest payment up to Rs 1.5 Lakhs per annum under Section 80EEA provided you fulfill the prerequisites thereof.
For first-time homebuyers: If you are a first-time homebuyer and an individual taxpayer, owning no residential property as on the date of sanction of the loan, there is an exclusive tax benefit that can be availed. The loan must be secured from a financial institution or a housing finance company and the stamp duty value must be lesser than Rs 45 Lakhs. You must also not be eligible to avail the tax benefits under 80EE of the Income Tax Act, 1961. If the above requirements are fulfilled, the maximum permitted amount of deduction shall be up to Rs 1,50,000 for the assessment year 2020-2021 and its succeeding assessment years.
For co-borrowers: Co-borrowers of the home loan who are also joint owners of the residential housing property, can separately claim a maximum deduction of Rs 2 Lakhs. Therefore, a combined maximum deduction of Rs 4 lakh can be claimed by the borrowers jointly.
If you meet the standard and are eligible to claim any of these tax benefits, claim them to save on the exorbitant costs involved in buying a home!