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Monday, May 7, 2018

Get Additional Tax Benefits on your Home Loan this Financial Year

A Home Loan is often the most convenient way to finance a home purchase. With real estate prices heading steadily upward, it has become pretty difficult for the average middle class Indian to purchase a home without resorting to some means to finance the purchase.



Taking a Home Loan has dual benefits—it keeps your liquidity intact, and gives you Tax Benefits. With banks adopting MCLR as the benchmark, coupled with the additional tax benefits that are on offer, there has been a spurt in the demand for Home Loans.

New Home Loan: the tax benefits 

Extra deduction on Home Loan under Section 80EE

This deduction is available for first time home buyers. Interest on Home Loans are deductible under Section 24 of the Income Tax Act to the extent of Rs.2 lakh per year, provided the property is self-occupied. This amount is deducted from your gross total income. The deduction of Rs.50,000 is over and above the Rs.2 lakh deduction.

To claim the deduction under Section 80EE, the following are the necessary pre-conditions.

  • The deduction is available only for residential self-occupied properties
  • It can be availed only by first-time home buyers
  • The value of the house property should not be more than Rs.50 lakh
  • The loan taken should not be more than Rs.30 lakh
  • The maximum deduction is pegged at Rs.50,000 a year
  • The loan sanction period must be between 01.04.2016 to 31.03.2017


2. Increased time limit for interest deduction

The time period within which you can claim interest deduction has been increased from 3 years to 5 years, from the date of acquisition (the day the loan was taken on). With time delays occurring in housing projects, this increased time span to claim deduction is a boon to homeowners.

3. Increased limit under Section 80GG

A deduction under Section 80GG is available to individuals who aren’t in receipt of HRA. The calculation runs like this: rent payments in excess of 10% of an individual’s total income can be claimed as a deduction, subject to the condition that this does not exceed Rs.2000 per month, or 25% of the total income, whichever is smaller. This limit has since been increased to Rs.5000.
The increased deduction limits and the extended times to claim the deduction have delivered quantum benefits to individual assessee.


What does budget 2017 have in store for us?

This year’s budget is round the corner, and many are hopeful that there will be additional benefits on Home Loans, giving the country a much-needed push into affordable housing. The interest subvention of smaller value housing loans—to give a boost to affordable housing—is being sought to be extended to metros as well, in view of the spiralling real estate prices.

For first-time home buyers, interest exemption is sought to be raised to Rs.3 lakh for 5 years, and the property value to Rs.1.5 crore from the existing Rs.50 lakh. If you have taken a joint Home Loan to increase your loan eligibility, these deductions can be claimed by each of the joint Home Loan borrowers proportionately.

With a Home Loan in hand, you can buy your dream home and also utilise tax benefits offered by a Home Loan. This actually reduces your tax liability.

1 comment:

  1. I liked these details on additional Tax Benefits. Keep posting such details here. I am too very much concerned about my investments and savings. Would be creating a financial plan on my own. Recently learnt about Risk Profiling and now going through other needs to know before making investments.

    ReplyDelete

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