tax benefits on a home loan

Understand the Tax Benefits That You Can Avail on Your Home Loan in 2020

Buying a house is a long-awaited dream for many individuals. The Government of India has shown a strong impetus in encouraging such dreams and helping individuals purchase a residential property of their own. Tax benefits on a home loan are one of the most important points in this context.

A number of schemes introduced by the central government, like the Pradhan Mantri Awas Yojana, strive to eradicate the issues of affordability and accessibility of purchasing a new residential property. The added tax exemptions can help a borrower save significantly on payable IT over a financial year, helping reduce the overall loan burden.

Home loans are a vital financial product for not just a prospective homebuyer but also for the overall real estate sector and the economy as well. Borrowers often study the veterans’ guide to home loans to multiply the benefits drawn from it. Individuals availing housing loans are eligible to avail multiple tax benefits on them.

Through the 2019 budget, the government has proposed to raise the exemption which individuals can claim on loans availed for affordable housing. It looks to increase exemptions from Rs.1.5 lakh to Rs.3.5 lakh per annum in case of residences requiring home loans till up to Rs.45 lakh.

Detailed information about home loan tax benefits

Home loans or loans availed against property are popular as they do not just provide the borrower with funds but also brings numerous benefits also. This includes how a housing loan helps in choosing the perfect property to invest in, putting existing assets to use, minimizing tax outgo, and so on. Here is a list of tax benefits on a home loan and exemptions –

  • Exemption in respect of interest payable on a home loan

If a borrower has chosen the EMI option to repay a home loan, it will have two components – the interest payment and principal repayment. The interest portion of the EMI for a year can be claimed as tax exemptions by the borrower till up to Rs.2 lakh u/s 24b.

  • Exemption on principal repayment

Under Section 80C, the principal portion of the home loan EMI being paid by the borrower can be claimed as an exemption. The maximum amount which can be claimed is Rs.1.5 lakh per year. However, to claim this exemption, the house must not be sold within 5 years of possession.

  • Exemption on interest paid on home loans during the pre-construction phase

Individuals who might have purchased an under-construction property and have not yet moved in, but still having to pay EMIs on housing loans, can also enjoy home loan tax benefits. It can be claimed on pre-construction interest.

  • Exemption for registration charges and stamp duty

Under Section 80C, tax exemptions can be claimed on stamp duty and registration charges. The maximum limit permitted under this claim is Rs.1.5 lakh, and it can be claimed only in the year in which the mentioned expenses will be incurred.

  • Exemption under section 80EEA

To claim this additional exemption, the stamp value of the property must not exceed Rs.45 lakh. The 2019 budget increased the maximum tax exemption limit under Section 80EEA to Rs.1.5 lakh. Note that this exemption is over and above benefits of Rs.2 lakh u/s 24b.

Looking for ways to avail tax benefits on home loans is one of the primary things a borrower must focus on after availing the advance.

Planning and arranging funds to buy a new house is simple, with the help of a home loan. Furthermore, the home loan tax exemptions make them an ideal option for individuals trying to stay under a budget.

A borrower must ensure to make most of the relevant home loan tax benefits and boost his/her savings. Tax exemption claims on a home loan can be made online without having to visit the income tax office.

Similar Read: Understand How Your Home Loan Can Offer You Tax Benefits

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