The Indian Government has been increasingly considerate and supportive of citizens aspiring to buy new properties or homes.
As a result, the Government has ensured several tax benefit schemes applicable to home loans. Thus, if you consider taking a home loan, you would be relieved of the immediate expenditure and enjoy several tax deductions and benefits.
These schemes have reduced the issues with accessing home loans and reduced difficulties in having one’s own house.
If you consider taking a housing loan, you can opt for a deduction on the loan and the interest payment. The Income Tax Act passed in 1961 consists of various sections on how you can opt for relief on both. However, you should first understand and calculate your interest using a PNB Housing home loan calculator.
Know more about tax deductions
Tax deductions are monetary benefits that reduce taxable income and, thus, a person’s or company’s income tax. The purpose of this article is to summarize the most important ones for individuals and businesses.
A Tax deduction is a reduction in the amount of income tax payable by an individual or corporation, which is itself a form of public subsidy. In many countries, taxpayers are allowed a deduction for certain expenses incurred during the taxable year.
There are many clauses and sub-sections under the Income Tax Act that deduct the principal loan and its interest payment. Some of them are as follows-
Section 80 C
Housing loans for purchasing or constructing properties fall under this category for a deduction. Under this section, an individual can claim up to 1.50 lakhs as a deduction in a year. This section also helps individuals deduct taxes on the provident fund, the principal amount of the loan, life insurance policies, and much more.
This section enables you to claim a deduction of up to 2 lakhs towards the interest payment made against your loan. Thus, you can calculate your home loan interest and understand the amount of tax deduction you are subject to. Such a provision is applicable only for self-owned properties. However, remember if you are applying for this loan to construct a property, the construction must be completed within five years from the date of loan sanction.
This section was introduced from 2013-15 to encourage new home buyers. This section provided lucrative property purchasing opportunities by providing deductions additional to the ones included in sections 80C and 24. The current deduction limit is 50,000 yearly. Remember, you can opt for this deduction only if you purchase a house for the first time and the property’s value is not higher than 45 lakhs.
The sections mentioned above are some of the most lucrative tax deductions the Government ensured to encourage property purchase. However, these sections consist of several subsections and clauses which determine your eligibility.
Therefore, to maximize your tax benefits through these deductions, you must read the section’s policies and calculate your home loan interest. In doing so, you would be able to maximize your benefits and choose the most appropriate tax deduction policy for you.
Once you get there, taking a home loan and building your own dream house would look achievable!