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Home Loan Tax Benefits: Maximising Savings for Indian Homebuyers

Purchasing a home is everyone’s dream. The Indian Government provides various tax benefits on housing loans to motivate citizens to invest in real estate under the 1961 Income Tax Act. Apart from decreasing your tax bill, these benefits help manage your tax flow efficiently. Knowing tax benefits on home loans is as important as using a home loan EMI calculator. The tool helps ascertain the monthly EMIs, and knowing the tax benefits can help save a considerable sum of your tax payments. Purchasing a home is an important investment. Nevertheless, knowing the complications of tax benefits on the home loan interest rate can be tricky, especially for people buying a home for the first time.

With the help of this blog post, you will clearly understand the various tax benefits to make sound decisions and make the most of your savings. Therefore, whether you are a first-time home purchaser or second, let’s dig into the tax benefits and explore how to leverage them.

Tax Benefits on Home Loans in India

The following are the tax benefits on home loans in India:-

Tax Reduction on the Paid Interest

As per Section 24 of the 1961 Income Tax Act, if you own and reside in your residential property, you can claim a maximum reduction of Rs. 2 lakhs on the interest on your home loan. On the other hand, if you do not reside in your residential property but have rented it out, there is no limit on the amount you can claim as a reduction.

Tax Reduction on the Repaid Principal

The 80C Section of the 1961 Income Tax Act lets you claim a reduction of approximately Rs. 1.5 lakhs on the principal payback of your housing loan, regardless of whether you rent or reside in your residential property.

Tax Privileges for Joint Borrowers

If you have opted for a home loan with your partner, you and your spouse can claim a reduction on the paid interest and the repaid principal amount. The reduction amount will be based on the property’s share of ownership.

Tax Privileges for First-Time Home Purchasers

According to the 80EE Section of the 1961 Income Tax Act, first-time home buyers can claim an additional reduction of approximately Rs. 50,000 on the home loan interest rate. The reduction is separate from the Rs. 2 lakhs reduction, available under Section 24.

Tax Privileges for Second-Time Home Purchasers

If you have a second residential property, you can claim a reduction on the paid home loan interest rate. Moreover, if you rent out your second property, you can claim a reduction on the whole interest without upper restriction. Still, no reduction is available on the principal repayment.

Note: To avail of these benefits, you should keep the required documents like loan statements, tax certificates, and property ownership information handy. It is also advisable to consult a financial advisor to understand the intricacies and complexities of home loan tax benefits.

How to Calculate Home Loan Tax Benefits?

Using a home loan EMI calculator is the easiest way to ascertain your tax benefits on housing loans. Input your home loan details, click calculate, and a precise tabulation will emerge. The details you will require are as follows:

  • Amount of Loan
  • Loan Period
  • Home Loan Interest Rate
  • Loan Start Date
  • Aggregate Yearly Income
  • Current Reduction Under Section 80C/D

Tips for Making the Most of Home Loan Tax Benefits

The following are a few tips you can follow to make the most of your home loan tax benefits and save big:-

  • Selecting the right repayment option is advisable to let you pay a high amount to maximize your tax benefits.
  • Take advantage of tax benefits for joint borrowers, where you can claim tax benefits on the principal amount and interest. It will help maximize your savings if your co-borrower is under a higher tax bracket.
  • Plan to prepay, which can help you save big and maximize your savings.

Note: The tax benefits are subject to many provisions under the 1961 Income Tax Act, and the privileges can range based on your financial condition. Consulting a financial advisor is advisable to understand the strategies depending on your situation.

Conclusion

Although purchasing a home might include numerous expenditures, you can claim home loan tax benefits and decrease your costs substantially. Check the benefits you qualify for and take advantage of them. Tax benefits on home loans are valuable for people searching to save on taxes while financing their home. However, understanding the eligibility requirements, essential documents, and ultimate strategies for maximizing these benefits. 

Compare the home loan interest rate and calculate EMIs with a home loan EMI calculator. Although a home loan has a price, using it judiciously can substantially decrease your financial load and let you make the most of your tax savings.

Check Also: SMFG Grihashakti offers a range of mortgage solutions to meet the needs of every individual. Explore our offerings across housing finance, commercial property loans and loan against property to know more, you can visit our official Karnataka branch: https://maps.app.goo.gl/yraUrgBj6jNSaRjb7

mark harper

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