Income Tax Benefits on Home Loan

A home loan is a huge responsibility. For a middle income individual, it eats away more than half of his monthly salary. Our parents had a home loan and we saw them struggle through it and the same situation is going to repeat with us, if we don’t budget the whole affair. If an individual is earning Rs. 20,0000 and out of that Rs. 13,0000 goes in home loan then you can only imagine the plight. Well, don’t be discouraged; home loan is not all that bad. If you’re earning an average income then budget the home loan EMIs, understand the Home loan interest rates and plan your monthly expenditures accordingly. Purchasing a house is a great investment and availing home loans is the easiest way to do it. Also, the Government provides a lot of Income tax exemptions and deductions on home loan.
Before jumping into the details let us understand the 2 categories on which repayment of home loan falls into and the tax benefits you avail from it –
• Repayment of Interest
• Repayment of Principal Amount
As you can see, the repayment falls into 2 different categories and the tax benefits are also given accordingly.
• Section 80C: Tax Benefit on Home Loan against the Principal Amount
A home loan can be claimed on the principal amount by an individual or Hindu Undivided Family (HUF) under the Income Tax Act of India Section 80C. Under this Act, the maximum deductible amount is Rs. 1.5 Lakhs; the amount was revised in the 2014 financial budget from Rs. 1 Lakh.
• Service Tax on under construction property
This is the taxable amount collected by real estate developers, builders, or any other individual who offers services for selling the unit. However, the payment is due at the time of construction and before the issuance of building complete certificate by the competent authority.
• Tax on units before construction
If the home loan availed is for buying a property or constructing a new unit, then the interest paid until the construction period becomes the aggregated amount and the full sum is eligible for tax deduction. The payment will be done in five installments for a period of five years, starting from the financial year of the completion of the construction.
Only apply for a home loan after carefully understanding all of the factors attached. Conduct a thorough market research about interest rates and repayment tenure; choose one that fits in your budget.

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