Checklist to avail Tax Benefits on Home Loan?
Every individual dream of owning a house. To encourage the citizens to invest more on a property, the government provides several tax benefitsto the citizens. Thus, it becomes very important for all the citizens to be informed about all tax benefits on home loan. Generally, home loan consists of both interest payments and principal repayment. Under both these categories, there is a provision of availing tax deduction.
Home loan tax benefits- Current
The following are the relevant details of the yearly deductions that are related to the interest paid on property loan:
- You can claim a deduction of about Rs. 2 lakhs in case your property is self-occupied
- There is no limit on the amount that you pay as interest if your property has been let out on rent.
- If you are the co-borrower as well as the co-owner of the house, you can claim for a maximum deductible amount.
- Deduction of Rs. 2 lakh applies only if you have completed the construction of the property within 5 years. In the case of incomplete construction, the amount claimed can be upto Rs. 30,000.
- In case you have given the property on rent, the amount claimed can be anything as spent on interest.
Home loan tax benefits- Principal deductions
All the relevant details related to the yearly deductions on the interest paid on property loan are mentioned below:
- A claim of Rs 1.5 lakhs can be claimed as a deduction every year, for both let-out and self-occupied properties.
- Complete construction of the property is essential to claim the deduction.
- You cannot claim the deduction if the house is sold within 5 years of possession.
- In case the house is sold within 5 years of possession, the deduction claimed will get reversed in the year when it is sold.
- In case you are the co-owner and the co-borrower, Rs 1.5 lakhs can be claimed as a principal deduction.
- You can claim the registration fees and the stamp duty that you have paid for the property.
Home loan tax benefits- Additional interest for the first time buyers
In case you are buying a house for the very first time, you can claim these additional interest deductions:
- The loan must be taken between 1st of April to 31st of March.
- The property should value less than Rs. 50 lakhs.
- The home loan amount should be within Rs. 35 lakhs.
- Till the time you repay the loan, an amount of Rs. 50,000 can be claimed as an additional interest.
How to claim tax benefits on home loans?
It is a simple process to claim tax benefits. Mentioned below are the steps that can help you claim tax deductions:
Step 1– Calculate the amount of tax deduction that has to be claimed.
Step 2– You need to ensure that you are the owner of the house or the co-borrower of the particular loan.
Step 3– Thereafter, you need to provide the ‘Home loan interest’ certificate for adjusting the TDS or tax-deductible at source.
Step 4– You can also file a tax return all by yourself.
Step 5– If you are self-employed, you don’t have to submit these documents. Just keep them handy for future reference. While availing tax benefits on a home loan, you must keep in mind your income. Various financial institutions offer top up loan facilities. Individuals often get the right tax benefit amount which helps them to buy their dream house. You can also consult legal advisors to make an informed decision on home loans.