Getting a home loan is the best way to get rid of monthly rent, own your own sweet home, and make a heavy investment for life. Thankfully, several financial institutions offer your home loans at the most competitive interest rates, based on certain criteria like age, employment and income status, and credit scoring. The other factor is how Government schemes encourage you to apply for a home loan at affordable rates to enjoy the privilege of obtaining your own house!
One of the biggest benefits of home loan is the tax saving on home loans. This means a dual benefit of saving on hefty interest rates and acquiring bulky tax exemptions. Here we will discuss how you can save on taxes by taking a home loan.
How Can You Save on Taxes by Taking a Home Loan?
Here are some of the important ways in which you can obtain tax exemptions on home loans:
Tax exemption under section 80C of the Income Tax Act 1961
You can save up to Rs. 1.50 lakhs per year of tax under section 80C on taking a home loan. You can claim a one-time registration fee and stamp duty paid and this benefit will only be provided on fully constructed homes.
Tax exemption under section 24B
You can save up to Rs. 2 lakhs per year, under section 24B, based on the interest amount that you pay towards your home loan. In the case of a home under construction, you get the benefit of tax exemptions under section 24(b) on 1/5th of interest related to the pre-construction period and interest related to the post-construction period.
Tax exemption under section 80EE
You can enjoy an additional tax saving on home loans under section 80EE if the cost of the property is within Rs. 50 Lakhs, and the loan amount is up to Rs. 35 Lakhs. Another condition is that the loan should have been approved between 1st April 2016 and 31st March 2017.
Tax exemption under section 80EEA
An additional tax exemption can be availed on home loans under section 80EEA if your home loan was approved between 1st April 2019 and 31st March 2022. However, there are other conditions associated with this waiver. This is available to first-time homebuyers, NRIs, and Joint homeowners. The stamp duty should be within Rs 45 lakhs, and the homeowner should not be eligible for tax exemptions under section 80EE
Tax Exemption in Case of Joint Home Loans
Under Section 24 and Section 80C, each party who applies for a home loan gets the benefit of home loan interest exemptions up to Rs 2 lakh under Section 24(b) and loan amount deductions up to Rs 1.5 lakh under Section 80C. This is exceptionally favourable if the joint home loan is taken by a couple. This means double the number of tax benefits, provided both parties are co-owners of the house and all EMIs are paid on time.
Exemption of Stamp Duty and Registration Charges
Under section 80C of the ITA, you have the leverage to claim Stamp Duty and Registration Charges up to Rs. 1.5 lakhs in the financial years when these expenses were incurred.
Tax Savings on Purchasing a Second Home with a Home Loan
For a second home loan, you again get tax benefits on the interest amount paid out. A recent amendment now allows you to treat your second home as a self-occupied property, for which you are eligible to earn some tax exemptions.
Read Also This: Processing Fees for Digital Applications on Home Loans
How Can You Calculate Your Tax Benefits?
Just like you can get the most feasible interest rate on a home loan by using a home loan EMI calculator, you can also use a home loan tax benefit calculator, which is based on your annual income, other investments under section 80C, home loan principal amount, loan tenure, and current interest rate.
This digital tool is a convenient, free-of-cost, user-friendly, and hassle-free tool that is available 24/7 on any device, even on your smartphone. Since it is an automated tool, there is no room for error, and it saves you from exhausting manual calculations. You can calculate your eligible tax deductions and the final payable amount with the help of a home loan tax saving calculator.
Conclusion
A great way to save money and pay lower interest amounts would require you to check the fixed interest rate home loan interest rates today constantly—it will lower your taxes and help you get your dream home in the long run. Now that you know the advantages of obtaining key tax exemptions on a home loan that is available at low-interest rates, make sure you weigh the pros and cons of applying for a home loan and get your own house today!