What Makes Home Loan a Tax Saving Proposition?

General

Buying your dream home is a remarkable achievement for most people in life. However, it can be hard and financially draining to buy a home of your liking all by yourself. The sky-high real estate prices have made it challenging for common people to buy or build their dream homes. The good news is that there are many reputed financial institutions like Clix Capital that have an easy home loan application process and offer loans to interested property buyers. A home loan can help to ease your financial burden and provide you with the ownership of your dream house. You can choose a flexible repayment tenure to pay back the loan amount over time as per your budget and needs.

What is a home loan?

In the simplest term, a home loan can be explained as a financial tool that allows you to purchase a house and requires repayment of the debt within a given period. Home loans are secured loans that are offered to borrowers for buying a house which is also pledged as collateral. There are plenty of home loan tax benefits that you can leverage to your advantage. It allows the borrower to obtain high-value funding at a very nominal interest rate for a longer tenure. Since the property prices are quite high, it makes sense to borrow a large sum for buying a home. A longer tenure helps to ease the financial burden of the borrower. Let’s dig deeper to find out some of the most interesting home loan tax benefits.

Home loan tax benefits

Some of the most prominent home loan tax benefits are listed below.
 

Deduction for interest paid on housing loans

As per the rules related to the use of funds for home loans, borrowers are required to use funds for either purchasing a house or constructing the same. In the case of the latter, the house must be constructed within five years from the end of the financial year in which the amount was borrowed. A home loan repayment through Equated Monthly Instalments (EMIs) has two components, i.e., interest charges and principal repayment. One of the most important benefits offered by a home loan is that the interest component of the EMI paid for the year can be claimed as a deduction from your total income (up to INR 2 lakhs) as per section 24. In the case of a let-out property, there is no upper limit on the claims.

Deduction on interest paid for a home loan during the pre-construction phase

Let’s take a case where the borrower has purchased an under-construction property and is yet to move in but is paying the EMIs. In this scenario, your eligibility to claim interest on home loans as a deduction will start only after the completion of construction. In case you buy a full constructed property, it will start as soon as you make the purchase. As per the Income Tax Act, the borrower is allowed to claim deductions of interest paid during the preconstruction period. The maximum amount that can be claimed is limited to INR 2,00,000.

Deduction on principal repayment

Any principal amount of the home loan that is paid as a part of EMI during a given year can be claimed as a deduction under Section 80C. The maximum amount that you can claim is limited to INR 1.5 lakhs. However, it is important to note that to claim this deduction, the property should not be sold under 5 years of possession. In case you sell the house within 5 years and have claimed any deductions, it will be added to your total income during the year of sale.

Deduction for stamp duty or registration fees

In addition to claiming the deduction for payment of principal, you can also claim deductions on account of stamp duty and registration fees paid during the purchase of your property. As per Section 80C, the total claim amount here is limited to INR 1.5 lakhs. This amount can only be claimed in the year these expenses were incurred.

Additional deductions under Section 80EE

To claim additional deductions up to INR 50,000, property buyers have to meet the below-mentioned requirements.

    • The total loan amount taken to purchase the home should not exceed INR 35 lakhs and the total value of the property purchase should not be higher than INR 50 lakhs
    • On the date of loan sanction, the individual buying the house must be a first-time homeowner

Additional deductions under Section 80EEA

To give a boost to the housing sector, the government of India introduced additional deductions under Section 80EEA for property buyers that allows them to avail deductions up to INR 1.5 lakhs. Some important terms that must be met for availing of these deductions are listed below.

    • The total stamp value of the home should not be higher than INR 45 lakhs
    • The loan must have been sanctioned between 1st April 2019 to 31st March 2022
    • The borrower must be a first-time homeowner on the date of loan sanction
    • The borrower should not be eligible to claim any deductions under Section 80EE if claiming deductions as per Section 80EEA

Deductions for a joint home loan

In case the home loan is taken jointly, loan applicants can claim for a deduction on account of home loan interest up to INR 2 lakhs each. The deduction claims for principal repayment under Section 80C is allowed up to INR 1.5 lakhs each in the annual tax returns. For claiming this deduction, the loan applicants should also be co-owners of the property in consideration. This means that you can get a higher tax benefit under a joint home loan.

Clix Capital home loans

Your dream property could also be a dream home for someone else. You must act faster when it comes to buying your dream house. Clix Capital offers quick disbursal for home loans and offers the best interest rate for home loans in the market. You can get a flexible loan tenure and choose a repayment tenure of up to 25 years. Loans up to INR 2 Crores can be obtained from Clix Capital for property ownership.

Submit your online home loan application and buy your dream home today!

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