Summary: Read this article to gain a more nuanced comprehension of these home loan tax benefits.
A home loan helps individuals own a home in situations where they do not have enough money to pay for the property in full. A home loan offers income tax benefits in addition to the joy of homeownership. Did you know that, nonetheless?
Let us confirm. You read that right!
Your tax liability can be reduced with several provisions of the Indian Income Tax Act if you have taken a home loan. These provisions can benefit taxpayers who have availed of a home loan.
Deduction on Interest Payment:
You may deduct up to Rs. 2 lakhs of the interest paid on your house loan during a fiscal year under Section 24(b) of the Income Tax Act. It is possible to deduct this expense for privately owned and rented houses.
The maximum deduction limit drops to Rs. 30,000 if the property's development is not finished within five years of the financial year in which the loan was obtained.
Deduction on Principal Repayment:
Section 80C of the Income Tax Act allows you to claim a deduction of up to Rs. 1.5 lakh on the principal repayment of your home loan. This deduction is available only for the year the property is constructed.
It is important to note that this deduction is part of the overall limit of Rs. 1.5 lakh includes other eligible investments such as EPF, PPF and life insurance premiums.
Documents Required for Home Loan:
To claim these home loan tax benefits, you must keep the following documents handy:
- The lender's home loan statement shows the interest and principal components.
- If relevant, a certificate of completion of the property's construction.
- Property ownership or possession certificate.
- Contract with the builder or developer.
- Any other papers pertinent to the house financing.
Conclusion
If you have taken a home loan, it is crucial to be aware of its income tax benefits. The deductions on interest payment and principal repayment can significantly reduce your tax liability and make homeownership more affordable.
Ensure that you keep the necessary documents ready to claim these benefits accurately. Consult a tax professional or refer to the Income Tax Act for detailed information and eligibility criteria regarding home loan tax benefits.
