Buying a house is quite expensive and can probably take a lot of time, energy and savings of a person. Managing the cash flow becomes difficult when you have to pay your regular house EMIs. But this cash crunch can be avoided if you know about all the tax benefits you can avail from your home loan! The tax benefits help you to manage your cash flow and save money too. But if you know the exact details of the tax benefits you can get on your home loan, don’t worry! Read the following.
Deduction on loan’s interest rate:
You can avail income tax deduction on your home loan’s interest rate as per Section 24 of Income Tax Act. The total which you have paid as an interest rate of your loan will be deducted from your income tax. The deduction is given to amount up to Rs. 2 lakh in that specific financial year. Also, if you miss any EMIs in this tenure, you still remain eligible to claim for this tax benefit. This deduction can be availed only if you have taken the loan to purchase a new house or to build a new one.
Deduction on loan’s principal repayment:
You can avail income tax deduction on your home loan’s principal repayment as per Section 80C of Income Tax Act. Your EMI comprises of interest rate and principal amount of loan. The portion of principal amount in the EMI is eligible to get tax benefits. You can avail deduction up to Rs. 1.5 lakh under section 80C. Also you can avail this benefit for the processing fees, stamp duty, prepayment charges and service fee you paid to avail loan. You can get deduction benefits as much as Rs. 1.5 lakh. Under the same section, the co-applicant of the loan or the co-owner of the house can also avail the same tax benefit.
Deduction for first time home buyers:
If you are buying a house for the first time, you can avail additional deduction of Rs. 50,000 on your home loan under Section 80EE of Income Tax Act. You can avail it along with tax deduction under section 24 and section 80C of Income Tax Act. But the loan amount taken should be minimum Rs. 35 lakh and the home amount should not be more than Rs. 50 lakh.
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