Top 5 Ways to Save Taxes Using Your Home Loan
Buying a home for the first time is one of the biggest milestones in a person’s life. Owning a home of your own gives you high returns and adds to your financial security. But apart from this, it can also help you take advantage of tax deductions. Here are five smart ways you can use your home loan to save taxes.
1. Tax deduction on home loan interest: If you are an owner and are listed as a borrower or co-borrower on the home loan, you can claim tax deductions on your home loan interest. The interest on the monthly EMIs being paid can be deducted from your taxes. You can start claiming this deduction right from the year when the house’s construction has been completed. For example, if the house is completed in May of 2017, you can claim deductions for the entire 12 month period from 2017-2018. If you’re currently residing in the house, you can claim a maximum of Rs. 2 lakhs on your taxes. If you are renting out the house, the entire interest amount for that year can be claimed as a tax deduction.
2. Deduction on repayment of principal amount: The section 80C of the Income Tax Act allows you to claim the principal amount of your home loan as a tax deduction as well. The total amount of your EMI for a year that goes into repaying the principal amount is claimable. The maximum amount you can claim under section 80C of the Income Tax Act is Rs 1.5 lakhs.
3. Deduction on payment of stamp duty and registration: Registering your property is important to give you a legal right over your home. It also helps you cement your position as the true legal owner of the property in case of any legal dispute. When you register your property, you also need to pay a registration fee and stamp duty. Both of these expenses can be claimed as tax deductions. Under section 80C of the Income Tax Act, stamp duty and registration charges are eligible for tax deductions. However, this is a one-time benefit since you can claim them only in the year when you paid them.
4. Deduction on interest prior to completion: While most people know that they can start claiming deductions on interest starting the year when construction has been completed, not many are aware that deductions can start even earlier. Pre-construction interest can be claimed prior to actual completion of the property. This deduction can be claimed in five equal installments starting from the time the construction has begun to the time you have taken procession.
5. Deductions claimed under section 80EE: You can take advantage of this tax provision if you are a first time home owner in India. For first time home owners where total value of the property does not exceed Rs. 50 lakhs, they can claim tax benefits if the total amount taken as loan doesn’t exceed Rs. 35 lakhs. They should have also taken the loan any time between 1 April 2016 to 31 March 2017. You can claim this deduction from the financial year of 2016-17. If your home loan meets the conditions specified under section 80EE, make sure you claim it when you are filing your tax returns.
Deductions on taxes are just one of the many benefits of owning your own home. If you are ready to buy a home of your own, visit Brigade for superior quality homes in top residential localities in Bangalore. All of our homes are equipped with luxurious amenities so you can start living life to the fullest with Brigade.