Complete Guide About Home Loan Tax Savings Under the Income Tax Act of India

Buying a new house is even more appealing in today’s’ market, due to interest reductions and tax waivers.  The Union budget of 2019 came up with new policies to boost the real estate market of India, with home loan tax benefits of 4.5 lakhs and more.

What is the total amount of tax wavier?

A total income tax benefit on home loan of a maximum of 3.5 lakh per annum in interest rate waiver can be availed for properties worth 45 lakhs and below. A 2 lakh waiver on interest rates is given on houses obtained for residential purposes and is self-occupied, as per section 24 of the Income Tax Act of 1961.  A minimum saving of 7 lakhs for 15 years is guaranteed for those opting for housing loans.

Income Tax Act provisions

Section 80C of the Income Tax Act states that the principal amount of a home loan is exempted from income tax calculations of an individual. An additional interest waiver of Rs. 1.5 Lakh will be given to those who avail loans before 21st March 2020. These tax benefits are available on a joint home loan.

This scheme of additional waiver is mainly applicable in Tier 2 and Tier 3 cities due to the scarcity in demand for housing advances. It aims to boost the demand in rural and semi-urban parts of India. The metropolitan cities would not benefit much because of the already heightened demand and surging prices.

Conditions to avail this benefit-

  • Property has to be complete and not under construction.
  • You need to own the property for at least five years since possession.

Under Section 80EE, first-time homeowners can enjoy tax savings advantages on the home loan interest payable. A maximum deduction of Rs. 50,000 can be made, in addition to exemptions related to Section 24 and 80C.

Minimum requirements to enjoy benefits under 80EE:

  • The property value should be less than 50 lakhs.
  • The total amount of debt should be less than 35 lakhs.
  • It must be the first house bought by the person seeking an income tax waiver.
  • Property should be for residential purposes.

If a top-up loan is availed in addition to the primary mortgage, then a waiver of Rs. 30,000 is applicable to the interest rate annually.

Buying a property involves a lot of expenses along with the preliminary cost of the house. Property owners also need to cover the expenses of Stamp Duty and Registration Fee.  Stamp Duty is calculated based on the market value of the property at the time of purchase, while Registration Fee is the amount paid to the government to get the property registered under the name of the owner. Stamp duty and registration charges together amount to 7-10% of the property value.

Tax benefits on home loans are not restricted to just one financial institution. People availing a home loan balance transfer facility to a different lender due to the lowest home loan interest rate offered are still entitled to the same benefits and waivers on income tax. An important thing to be noted is that waivers on income tax are only applicable if the amount borrowed is spent on expenses related to housing needs only.

How to claim tax waivers?

You have to calculate the total amount of tax-deductible from your annual taxable income, and then submit the home loan certificate to your employer to enjoy the waiver. If you are self-employed, file your tax returns by yourself or with the help of a chartered accountant, through the government portal.

Real estate also serves as an excellent sector for investing as the price of housing tends to increase over time, barring any economic abnormalities.

Leave a Reply

Your email address will not be published. Required fields are marked *