Buying a home will mean taking a home loan for many. Even if you are looking for properties like villas for sale in Mogappair, a housing loan is the best option. It is the first financial step towards a lifelong dream of owning property. It is however a long-term commitment that requires meticulous planning and considerable savings. But while this appears like a burden, there are several tax benefits that come with a home loan.
Awareness of these housing loan tax benefits can save you a lot of money. This article outlines the breakdown of your Housing loan and how each part of it can be claimed as a tax benefit for both first-time and seasoned home buyers.
Tax benefits of Interest payment
One can avail of a home loan for the purchase of a fully constructed home like a house for sale in Mogappair, or for the construction of a new house. In the case of a house loan for constructing a house, the building must be completed within 5 years. These 5 years are calculated from the end of the financial year in which the loan is taken.
The housing loan incurs interest in addition to the principal amount that needs to be repaid. The EMI that you pay monthly is comprised of both the principal and interest. You can claim a deduction from your income on the interest amount. This can be done to a maximum of 2 lakh rupees according to Section 24 of the Income Tax of India Act.
Remember this Rs.2 Lakh exemption is only in case the property like villas for sale in Mogappair is under self-occupancy and the construction has been completed in 5 years. However, if the construction period exceeds 5 years, then the deductible amount reduces to Rs. 30,000.
If the property is meant to be rented out, there is no upper ceiling on the amount you can claim as a home loan tax benefit. This is regardless of the completion status of the property.
Benefits availed on Interest before construction commences
If you purchase a property that is still under construction, the housing loan tax benefits only kick in after the construction is completed. This is applicable even though you have already begun paying the EMIs to the housing loan. This is however a minor setback. There are other provisions you can take advantage of and avail benefits on the interim period between purchase and handover after completion. The Income Tax of India act allows you to claim benefits on the interest paid during this period as well. It is not a direct deduction as in the case of the interest incurred on possession of the house.
It is called the Pre-Construction interest. You can claim deductions in 5 equal installments starting from the financial year in which the house was bought, till the year the project is completed. Again the maximum eligibility has an upper ceiling of Rs. 2 Lakhs.
Tax benefits on repayment of principal
As mentioned earlier, the EMI paid each month towards the housing loan has 2 components -The Principal and the Interest. The last 2 sections addressed the tax benefits that you can avail of on the interest component. In this section, we discuss the benefits of principal repayment.
Section 80C of the Income Tax of India Act states that an individual can avail of home loan tax benefit to the tune of Rs. 1.5 Lakhs as a deduction. This deduction is valid only after the property is completely developed and ready for occupancy. The deduction also includes the claims made on various taxes and duties associated with the purchase of the property. But it has to fall within the 1.5 Lakh Rupees limit. These taxes and duties can only be claimed in the same financial year as when they were incurred.
In the event that you wish to sell the property within 5 years of possession, then this deduction will be reversed. The claimed amount will fall back into your bank account after the sale in the same financial year.
Tax Benefits for first-time home buyers
For those who are hesitant about stepping into property investment, there are multiple tax benefits on housing loans taken out by first-time homebuyers. You might have your eyes on those luxurious villas for sale in Mogappair and they can help you get tax benefits. An individual can make claims up to Rs. 50,000 under Section 80EE of the Income Tax of India Act. The best part? This deduction is apart from the ones you already made on the Interest and Principal of the loan according to Sections 80C and 24.
However, there is a small catch. The value of the property must be less than Rs. 50 Lakhs and the value of the Housing Loan must be less than Rs. 35 Lakhs. The buyer must be a first-time homeowner and cannot have multiple properties to their name. If you happen to fit this checklist, then you can avail of these additional benefits that can save you a huge amount in taxes.
Tax Benefits for Joint owners and co-borrowers of the Housing loan
At times the property may be registered to multiple owners, especially in the names of married couples or siblings. This may also result in two people co-signing the loan. The previously discussed deductions of Rs. 2 Lakhs on the interest and the Rs. 1.5 Lakhs on the Principal amount are still applicable. To claim these deductions, both the co-signees of the housing loan must also be co-owners of the property. Both individuals can claim the deductions separately for the full amount.
Raunaq Foundations is a trusted real estate developer in Chennai. We cater to the specific needs of urban dwellers, opting for maximum utility and comfort with uncompromised quality. Our villas in Mogappair are a great choice for first-time homebuyers, with convenient access to all facilities. Our experts are just a call away, to guide you to a perfect property investment and educate you on the tax benefits of the same. Call us at 98842 43333.