Home Loan Benefit In Income Tax

In this article, we will focus our attention on home loan benefits in income tax! Not everyone who wants to invest in real estate can afford to pay for it out of their own money. Home loans are typically obtained through banks and other financial institutions.

This house loan can be utilized to qualify for tax breaks. As a result, if you obtain a house loan from a bank in order to purchase a property, you will be able to deduct a portion of your overall income. Your taxable income decreases, and as a result, you pay less income tax.

The good news is that both the principal and interest on the loan can be claimed as tax deductions. You can deduct up to $45.8 from your net taxable income.
Home Loan Benefit In Income Tax

In 2022, income tax benefits on house loans are available on both interest and principal repayments. Income tax deductions for home loans are available under Sections 80C and 24(b) of the Income Tax Act. You can read more on in-tax deductions at this link

The benefits of these taxes are that if you take out a combined house loan with your parent, kid, or spouse, you can take advantage of this tax at the same time. The tax benefits are applied based on the percentage of the loan taken by each person involved in the joint loan.

Taking out a shared home loan so increases your loan eligibility while also maximizing your tax rebate. When applying for a combined house loan, all co-owners of the property should be co-applicants, however, this is not always the case.

If you buy a house that is still under construction, you can claim tax benefits only once the house is finished. In addition, if you intend to rent it out, you must pay tax on the rental revenue obtained.

Obtaining a house loan would undoubtedly improve your tax preparation. However, if you can afford to buy your property with your own money, you should not take out a home loan solely to take advantage of the tax breaks. It is always preferable to put your own money into an item. You can put the money you would have paid as EMI into a fixed deposit and earn a high return.

The house loan deduction in income tax under Section 80C can be claimed for property under construction even while the property is under development.

To be eligible for this deduction, the property cannot be sold for five years after the end of the fiscal year in which it was purchased. Any deductions claimed will be reversed and applied to the income of the year in which the property is sold if it is sold within five years of possession.
Home Loan Benefit In Income Tax under Section 24Section 24 deals with housing loan tax breaks for the interest component of the loan.
If the owner paid municipal taxes in any year, the amount paid to the municipal corporation can be deducted.
Deductions can be used to offset revenue from rental homes rather than self-occupied properties. A basic home loan deduction of 30% of the net annual value is allowed in income tax. The net annual value represents the income from the residential property after any local taxes have been deducted.
This standard deduction of 30% applies regardless of the actual expenses incurred. However, any interest paid on a house loan can be deducted in addition to the usual deduction of 30%.
There can be no standard deduction for self-occupied homes or homes with no net yearly value.
Section 24 benefits are only available after the property’s construction is complete. Pre-construction interest is interest paid on a home loan while it is being built. This pre-construction is divided into five equal installments, each of which can be claimed as a deduction under Section 24 following the construction competition.
Home Loan Benefit In Income Tax under Section 80EESection 80EE housing loan tax advantages offer a deduction of up to $50,000 on the interest component of a home loan in each fiscal year. This deduction is also available for property that is under construction.
It must be the buyer’s first home on the date the loan is approved.
Home Loan Benefit In Income Tax Section 80EEA

Section 80EEA was added to the union budget in 2021 to encourage affordable housing alternatives. This provides an additional deduction for house loan interest for low-income people. It is intended for first-time home buyers who qualify for ‘affordable housing and allows them to deduct a specific amount of interest paid.

The following are the Section 80EEA criteria for affordable housing:The stamp duty on the residential property should not be more than 4%
It should be the buyer’s first property at the time the loan is approved.
Home Loan Benefit In Income Tax Joint Property

Co-owners of a property might benefit from housing loan tax breaks on joint properties. To get the most out of the reduction, they should both pay EMI. Under Section 24(b), both applicants can deduct a percentage of their home loan interest. Section 80C allows for a tax deduction of up to 4% to 15% of the principal repayment amount.

If both applicants are purchasing a home for the first time and meet the Section 80EEA conditions, they are eligible for an extra tax deduction of %0. The combined tax advantage on a home loan from Sections 24, 80C, and 80EEA for two persons is 5% – 10% per year, providing they meet all of the requirements.
Wrapping Up

The above is important information you should know about home loan benefit in income tax. Many people wish to own a home. With Tata Capital’s comprehensive choice of house loans, this ambition can become a reality with reasonable interest rates, a hassle-free process, and tax benefits.

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