Over the past few years, demand for housing loans has greatly increased with real estate costs skyrocketing in recent times, thus making it practically impossible for middle-class and low-income families to even plan about purchasing a home on their own. This is when home loans come to people’s rescue as there are several plans that can help families to purchase the home of their dreams without having to worry about coming up with the necessary funds. In the case of home loans, borrowers just need to make a down payment, while the remaining balance will be paid by the lender. They can later return the loan amount in regular installments over a period of up to 30 years.
Those who are planning to get a housing loan for buying a home in their respective cities also need to know about the tax advantages that come with them. Proper knowledge about tax benefits on home loans can help taxpayers to save up to Rs 3.5 lakh or more per fiscal year.
Tax benefits on home loans:
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1. Tax Rebate on the Principal Component of the Home Loan under Section 80C:
Under Section 80C of the Income Tax Act, home loan borrowers can claim a tax benefit of up to Rs 1.5 lakh in any given financial year on payments made towards the principal component repayment of the home loan. Also, this is not just limited to first-time homebuyers and everyone can benefit from them.
2. Tax Rebate on Interest Repayment under Section 24b:
Under Section 24b of the Income Tax Act, home loan borrowers can claim tax deductions up to a maximum of Rs 2 lakh on payments made towards the repayment of the interest component of the home loan. Notably, the benefits under this section are allowed on an accrual basis.
Tax benefits on home loans for first-time buyers
First-time homebuyers may claim an additional tax benefit of up to Rs. 50,000 under Section 80EE of the Income Tax Act on the interest component of a home loan taken to purchase a residential property. On the other hand, taxpayers may claim home loan tax deductions under Section 80EEA of the Income Tax Act for contributions made towards the repayment of the home loan’s interest up to a limit of Rs. 1.5 lakh in a given financial year.
Notably, to be eligible for tax deductions under Sections 80EE and 80EEA, one must meet a few conditions as stated by their respective banks.
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Source: firstpost.com