5 MinsNov 30, 2022
When people buy a home for the first time, it is a significant milestone to cross off on their checklist. But it is no cakewalk; buying your dream home requires a lot of money, and it is not easy on the pocket.
The Indian government always encourages people to buy homes. As the demand for new homes rises, it triggers a chain of economic activity. It stimulates the real estate sector and creates more jobs. The government is interested in offering incentives
to new home buyers. For this reason, a home loan qualifies for a tax deduction. The Income Tax Act of 1961 allows tax deductions on home loans. To make the best use of your home loan to lower your liability, you need to know the various ways
you can claim it.
What exactly does a home loan consist of?
A home loan repayment consists of the principal amount and the interest paid on the loan amount. Both parts are eligible for tax benefits under Sections 80C and 24(b) of the Income Tax Act of 1961. Detailed explanations of the home loan tax benefit
are outlined below:
- Deduction on the principal repayment amount:
Section 80C allows a deduction for the significant part of the EMI paid throughout the year. You can claim up to Rs. 1.5 lakh as the maximum amount.
However, to qualify
for this deduction, you must not sell the home within five years of occupancy. Otherwise, the earlier deduction you were allowed will be added back to your income in the year of the sale. - Deduction on the payment of interest:
You can deduct the interest paid on your home loan from your gross income under Section 24(b). You can avail a benefit of up to Rs. 2 lakh in interest costs for a self-occupied residence.
The section 80C deduction does not apply to commercial premises, though. You may claim this deduction on an accrual basis, i.e., by taking it every year even if you did not pay the required interest in that year but did pay excessively
the year before. For self-occupied properties, you cannot carry forward a loss.
Also Read: [How to calculate your home loan affordability]
How can you claim tax benefits on home loans?
Make sure of the following before claiming income tax advantages on a home loan:
- You are listed as the registered residential property owner, and if there is a shared loan, you should also be included as a co-owner.
- The amount that you can deduct from your taxes has been computed. You can get the exact interest calculation by using a home loan EMI calculator and home loan interest rates for availing tax benefits.
- The building's construction work is complete.
- You get a certificate from the bank detailing the interest and principal payment information.
- Your employer alters the TDS under the home loan tax benefit you wish to claim.
Advantages of taking a home loan:
1. When you make on-time EMI payments, it helps you raise your credit score. Banks and credit organisations view it as your ability to repay your debt, which increases your credibility.
2. By providing numerous tax benefits, it can also assist you in lowering your tax obligation.
You can achieve your dream of buying a home by availing a home loan. You must choose the best home loan option for you and consider all the advantages the bank you choose offers. You can significantly reduce the taxes you pay on the loan's payback.
Visit us to learn more about home loans from Axis Bank.
Click here to apply for a home loan from Axis Bank. You can also use Axis Bank's home loan calculator to compute your EMI payment, making it easy for you to fulfil your debt obligations.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
