Income Tax Exemption on Home Loan.

Buying your own house is a dream of every individual, but the financial burden can be overwhelming, and getting an Income tax exception can be a plus for any individual.Tax exemption on home loans saves your tax on both principal amount and interest paid.Let's further dive into details of home loan tax exemption and see how you can significantly save tax. 

Understanding Home Loan Tax Exemption.

Home loan tax exemption is a deduction you get on your Income Tax Return (ITR) for the interest paid on the principal amount and interest rate. With the help of these deductions, you can significantly cut down your taxable income, resulting in lower tax liability.

Home Loans Eligibility Criteria for Tax Exemption

• One self-occupied property: For one self-occupied home loan, You can claim tax benefits on the interest as well as on the principal repayment. 
• Multiple properties: If you own multiple properties, tax benefits can be claimed for one property as self-occupied and the remaining properties can be treated as let-out properties or deemed to be let out.

Home Loan Interest Exemption Limit

Let us see what home loan tax exemption sections are:

• Section 80EE of the Income Tax Act: This act allows you income tax benefits on the interest portion of a home loan taken from any bank or financial institution . This section allows a deduction of 50,000 per financial year.
• Section 24: Under section 24 of the Income Tax Act,1961, you can claim up to Rs. 2 lakh on the interest paid on a home loan.
• Conditions: to avail of this benefit, the construction of the property should be completed within 5 years from the issuing of the home loan.
• Joint benefits: This tax exemption benefit for the home loan you can get a claim under both the section 24 and 80EE. By combining both deductions, you can potentially save up to Rs. 3.5 lakh in taxes annually

By following specified restrictions and limitations, these sections enable homeowners to deduct from their taxable income the interest they have paid on their house loans. This lowers the total amount of taxes owed. 

If you purchase an under-construction property and pay the EMIs, a deduction in interest from your housing loan may incur after the completion of the construction. Adhering to the Income Tax Act, the pre-construction interest and post-construction interest may be written off. 

Also, the interest concerning the pre-construction period is allowed as a deduction in five equal annual instalments during the start of the year in which the housing property is acquired or constructed.

Home Loan Tax Exemption Calculator

A home loan tax exemption calculator is a digital tool to help you understand the potential tax savings associated with your home loan.

By inputting details like loan amount, interest rate, and income, the calculator accurately calculates the tax benefits you can claim under sections 24 and 80C of the Income Tax Act. This valuable information empowers you to make informed financial decisions, optimize your tax planning, and maximize your savings over the loan tenure.

You can use several online tools and calculators to determine your estimated tax savings depending on your tax slab, interest rate and home loan amount. You can get a clear picture of the financial advantages of your expectations. 

Conclusion:

Although buying a property requires a large financial commitment, the Indian government offers substantial tax benefits to encourage homeownership with generous tax breaks. By carefully planning and managing your home loan finances, you can maximize the tax advantages and make your homeownership journey more financially rewarding. Through the utilization of these provisions, homeowners can efficiently reduce their taxable income and, as a result, the overall amount of taxes due To maximize their tax savings, homeowners stay informed about these benefits and ensure they meet the eligibility criteria.

FAQs

1. What does Income tax exemption mean? 

Income tax exemption means a reduction in taxable income for home loans. for the interest paid on the principal amount and interest rate. 

2. What is the limit on tax exemption for home loans?

Under section 80EE you can claim 50,000 per financial year and under section 24 of income tax, you can get Rs 2 lakh deduction on Income tax on the interest paid on the home loan. 

3. Home loan Interest can be claimed up to which amount of deduction U/s 24(b)? 

Rs 2 lakhs per annum for home loan interest paid on a self-occupied property under Section 24(b) There is no limit to the amount of interest that can be claimed as a deduction for an investment property.

4. Do the first-time home buyer deductions continue? 

Yes, first-time home buyers can avail of an additional deduction of up to ₹50,000 which is available over and above the limit of ₹2 lakhs. This provision comes under Section 80EE subject to certain conditions like loan amount should be ≤₹35 lakhs & the value of property should not exceed ₹50 lakhs etc.. Another section 80 EEA provides an additional deduction of ₹1.5 lakh for first-time buyers with few certain conditions to meet the eligibility requirements.

5. Is there a possibility for both the home loan owners to avail tax benefits? 

 If the home loan is availed jointly, then yes both co-owners can get the benefit of tax individually So, if you and your spouse are co-borrowers on a home loan, as well as both being named in the property papers, 2 deduction claims can be made under Section 80C (both individually up to their respective limits), then one of them would take advantage for deductions under section24(b) too.