As SRK says in an advertisement of a leading housing finance company, “bada ho ya chhota, apna ghar aakhir apna hi hota hai”, having your own house is a desire which is present in everyone’s hearts. Not only does it save you from the hassles of shifting your house every 11 months when you are staying on rent, it also saves you the monthly rent you pay to your landlord. However, while the property prices are touching the skies, and even going beyond in some cities, thinking to buy a house is always a big challenge as it calls for a big-ticket financial investment. You may also get a housing loan instead which would get you committed for monthly instalments for a relatively longer term. Govt. has also been encouraging for housing facilities for all through various schemes including interest subsidy and also tax concessions on housing loans.
Here are the tax benefits that you can avail on a housing loan:
- Interest on Housing Loan – As per the present Income tax laws, you are entitled to claim a deduction in respect of interest amount that you pay on a housing loan. However, the interest is bifurcated into two parts for taxation purposes. First one is the interest on the pre-construction period, which denotes the interest charged in the housing loan for the period when the property was under construction. The tax benefit for such interest is however provided only once the property is ready for use and hence, you can avail the benefit of such interest in 5 equal installments starting from the year the construction was completed. For the interest charged from the year in which the construction is completed, you can claim the deduction in the same year.
Further, you can claim such deduction irrespective of the fact whether you have rented the property or it is self-occupied. However, the loss from house property due to interest in both the cases has been restricted to Rs. 2 lakh, helping you save tax up to a maximum of Rs. 62,400 (plus surcharge, if applicable). You may also have a co-borrower in your housing loan and this ceiling of Rs. 2 lakhs will be additionally available to the co-borrower as well.
- Principal Repayment of Housing Loan – A part of your EMI is allocated towards interest and the balance is allocated towards principal. The principal repayment of the housing loan is eligible for deduction under Section 80C of the Income Tax Act, 1961 once the construction is completed. However, this benefit is part of the basket of tax eligible payments under Sec. 80C and the total deduction is restricted up to Rs. 1.50 lakhs for all the tax saving options in aggregate.
As such, you can conquer your goal of having your own house and also save tax in the process. Edelweiss Partners helps you to avail Loans & Mortgages at competitive rates for your clients as it is the largest distributor of loans and has strategic tie-ups with multiple Housing Finance Companies and lending companies in India.