We all want to have our dream house someday, but some of us opt for home loans to buy the house. Though paying off the loan is quite hefty, however, you can get some tax benefits that can save a lot of your taxes.
Union Finance Minister Nirmala Sitharaman suggested in the most recent budget that the date for getting extra tax deductions on interest payments on home loans has been extended to March 31, 2024. This is because, in the last budget, the government moved the limit to March 31, 2022. So, All home loans approved by March 31, 2022, will have their terms extended until March 31, 2024.
Tax Advantages of home loan
You can get a tax deduction of up to Rs. 1.5lakhs under section 80C for the principal repayment.
You can get an additional deduction of up to Rs. 2lakhs under section 24B for the interest on the principal.
You can also claim a stamp duty deduction of up to Rs. 1.5lakhs under section 80C.
Deduction on interest under Section 24b
You can avail a home loan to build or buy a house. But you must finish building your house within five years of getting the loan. The home loan is made up of two parts such as principal payment and interest payment.
Under Section 24, you can claim up to Rs. 2 lakh deduction according to your interest payment.
The interest paid on a residence owned and lived in by the taxpayer is eligible for a tax deduction of up to 2 lakh rupees. This regulation is applicable from the beginning of the year 2018–19.
On the other hand, if your home is used as a rental property, there is no limit on the amount of interest that you can claim.
However, the maximum amount of damage that can be claimed for compensation under "House Property" is limited to just Rs 2 lakh. This limit applies to the overall amount of damage. You can claim this deduction starting with the year the house is constructed.
Tax deduction on principal repayment under Section 80C
You are allowed to deduct up to a maximum of Rs. 1.5 lakh from your taxable income on an annual basis for principal payments on properties that are either self-occupied or rented out.
There is a possibility that stamp duty and registration fees will be included in it. On the other hand, you can only make one claim for it.
Before you may lay claim to this deduction, the property in concern must first have finished its construction.
If you want to be eligible for this deduction, you must wait at least five years after taking ownership of the property to sell the property.
If you sell your home during the first five years of taking possession, all deductions you have previously claimed will be reversed in the year you sell the house. Additionally, this sum will be added to your income for the year in which the sale took place.
Tax advantages under Section 80EE
It allows you to claim tax benefits of up to Rs. 1.5 lakh on the interest component of a home loan you have paid.
The benefit can be obtained in addition to the current exemption amount of Rs. 2 lakh, outlined in Section 24(b).
It is required that the property's value be less than Rs. 45 lakh.
Tax benefits of owning a second home
According to the laws that are in effect now, tax benefits can be claimed for interest payable. You are entitled to receive a refund of the total amount of interest that you have paid.
To enable borrowers to enjoy greater tax savings, it has been suggested that a second house owned and occupied by the borrower should also be eligible for self-occupation tax benefits.
Tax benefits on joint home loan
When two or more people take out a house loan at the same time, each of those people can claim a deduction on the interest paid on the loan of up to Rs.2 lakh. A tax deduction for the principal paid can also be claimed for amounts up to Rs. 1.5 lakhs each. However, to be eligible for this deduction, all applicants must also be co-owners of the property in concern. As a result, you may qualify for better tax advantages if you take out a shared loan.
You can get a maximum deduction of up to Rs. 1.5 lakh on the principal repayment of the loan only when you sell out the property after five years of possession.
You can get a maximum deduction of up to Rs. 50,000 under section 80EE if you have taken a loan amount that does not exceed Rs.35 lakh, and the property value should not be more than Rs.50 lakh.
You can also claim a maximum deduction of Rs. 1.5 lakh on stamp duty under section 80C. However, it should be claimed in the same year when you pay the stamp duty fee.
Recent Changes (Union Budget 2023-2024)
The eligibility period for claiming an extra deduction for interest of up to Rs.1.5 lakh paid on a loan taken out to purchase an affordable house has been extended till March 31, 2022.
The duration for affordable housing projects can become eligible for a tax exemption has been extended by another year. The new date for the deadline is March 31, 2023.
To encourage affordable rental housing for migrant workers, a fresh tax exemption was proposed for the Affordable Rental Housing Projects that had been notified concerning their eligibility.
No significant changes were made to the deductions applicable to house loans; however, the biggest remarkable news is that the Pradhan Mantri Awas Yojana (PMAY) was given a funding allocation of 48,000 crores.
