Negosentro | Know Your Tax Benefits Before Buying a House | Who doesn’t yearn to buy a flat in rising skyscrapers? Today, most of the young population is investing their income in buying a flat in metro cities. Call it futuristic planning or strategies to save tax; the popularity of housing loans has witnessed a sudden surge.
As a part of developing smart cities, the government rewards lucrative tax benefits on home loans. On purchasing property through home loans, buyers can avail of attractive tax benefits. Now the question arises why does the government charge tax on home loans if at all they are rewarding tax liability deductions?
The Reason Behind Tax Benefits on Home Loan
Buying a property is possible only when you have the potential to earn for it or pay monthly instalments. Along with home ownership arises the responsibility of paying taxes. The government charges taxes based on your income, even if the unit is unoccupied for an unforeseen period.
However, the government also provides rewarding tax benefits on properties bought through home loans or housing finances. Home loan agents help you get easy loans at lower interest rates up to 6.5% per annum.
Home Loan Deductions Under 80C
This deduction is available for property construction and property purchase. Deduction under 80C can be claimed for self-occupied, rented, or deemed-to-be rented properties. Taxpayers can avail of a deduction of up to 1.5 lakhs per annum from taxable income on repayment of home loan principal.
If the owner sells the taxable property within five years from the year it was bought, all benefits availed under 80C will be reversed and added to your income for the sales year.
Home Loan Deduction Under Section 24(b)
Section 24(b) allows a deduction for self-occupied or vacant properties. Under this section, taxpayers can claim deductions of up to 2 lakhs on paid home loan interest.
This deduction applies only to home loans taken after or during 1999-2001. However, tax deductions are applicable on properties whose acquisition or construction was completed within 5 years from the year the home loan was taken.
Home Loan Deduction Under Section 80EE
According to new updates for the financial year 2022-2023, section 80EE allows the taxpayer to claim benefits up to 1.5 lakhs on the interest paid on the home loan.
However, the property’s value must not exceed 45 lakhs in the income year to claim this benefit. This benefit can be availed above the current exemption of 2 lakhs under the section 24(b).
Calculating Tax Benefits on Home Loan
The online home loan calculator is one of the best instruments available for calculating tax benefits under various sections offered by the government. All you have to do is enter your loan details, and a detailed tabulation will pop up. You can always ask your home loan agent to help if you are unfamiliar with online operations.
The details required for calculating a home loan are;
- Home loan principal amount
- Rate of interest
- Loan starting date
- The gross annual income of the applicant
- Existing tax deductions under sections 80 C and 80 D
If you are a first-time buyer and unaware of tax policies and benefits, it is always advisable to contact your loan agent.