Guidelines to claim tax benefits for home loan
Most people are confused and follow a misconception that people who have taken home loans cannot claim tax benefits. This is a false belief which most of them follow. The tax benefits for a home loan falls under the Section 80C and the Section 24(b). The Income Tax Act which was declared in 1961 provides the tax benefits for all the customers who have taken a home loan.
A home loan is repaid to the bank through monthly installments and is divided in to two parts, i.e., the interest and the principal repayment. The home loan seeker receives a detailed worksheet of the loan calculation and the bifurcation of the EMIs paid by the borrower from the bank. However, the monthly repayments are qualified for the deductions from the income tax.
The principal amount which is covered under the Section 80C has a limit of Rs. 1 lakh and will be available if the person is living in a home which is taken on loan. However, the loan seeker cannot use this exemption if the home is under construction or if he/she is not staying in the home. The only exemption which a loan seeker can avail is if he/she is working in a different city and can claim the exemption on the principal amount of the home loan under the Section 80C.
Tax benefit on the interest on Home loan: Section 24:
The maximum limit under the section as mentioned earlier is Rs. 1, 50,000 and one needn’t stay in the home in order to claim the benefit. The amount of interest which is paid is apparently deducted from the taxable income and hence reduces the tax liability. Also, there is no limit on the number of homes one can claim the benefit which is also based on the location of the home.
Circumstances under which one can claim tax benefits:
- If living in their own house:
- If the house is under construction:
- If the home is far-off:
- If the home is on rent:
- As long as the loan seeker is paying the rent, he/she can avail the tax benefits. And in case the home is ready for possession, he/she can get the tax benefits for both the principal and the interest amount.
