Guide To Home Buying Related Tax Benefits

Guide To Home Buying Related Tax Benefits

If you choose to take out a home loan, you are eligible for a number of tax breaks. 

What Is The Benefit Of A Tax Deduction?

A deduction does not really cut your tax; rather, it lowers your taxable income, which in turn reduces the amount of tax you owe. Your tax rate affects how much of a tax deduction you receive.

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A brief rundown of the tax savings is provided here:

Principal deductions: Under section 80(c) of the Income Tax Act, you are eligible to deduct up to Rs. 1.5 lakh in taxes each year for the principal amount repaid on the loan. This deduction is only available after the property's construction is finished, and it will be lost if you sell it within five years of taking possession.

Stamp duty and registration fees: Up to a total of Rs 1.5 lakh applied to principal repayment, stamp duty and registration fees are also eligible for tax deductions under section 80(c). This benefit is available to you whether or not you take out a house loan, however it is only available during the year that these costs are incurred.
 

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Interest deductions: For self-occupied property, you are eligible to deduct up to Rs. 2 lakh in taxes annually from the interest you pay on your loan under Section 24. Only completed property may be used to claim interest benefits. Subject to the section's maximum deduction ceiling, the interest paid during the under-construction period may be deducted in five equal payments. The whole interest payment can be deducted from the value of rental property.

First-time homebuyers may be eligible for an extra Rs. 1.5 lakh interest deduction under Section 80 EEA - Affordable Housing, subject to the following requirements.

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For residences under 45 lakhs; for homes in metro areas with an area under 60 square meters

• The loan must be approved until March 31, 2021, and the borrower cannot have any other assets at that time.

Extra deductions: Under Section 80EE, first-time homebuyers are eligible for an extra Rs. 50,000 in interest deduction, provided they meet certain requirements.

• The residence should be worth no more than Rs 50 lakhs.
• The amount borrowed for the home shall not exceed Rs 35 lakhs.
• The loan must be approved between April 1, 2016, and March 31, 2017, and the borrower cannot possess more than one residence on the approval date.

If A Property Is Still Under Construction. Can I Claim Tax Benefits?

Tax deductions are not available until the construction is finished. Once everything is finished, you may get the interest you paid for the time leading up to the year you took possession deducted. Claimable in five equal instalments beginning in the year construction is finished, up to the annual maximum allowable interest deduction under Section 24.
 

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Can The Co-Owner Of The Apartment Also Claim Tax Benefits?

Yes, if the co-owner receives an income from a different source, they may claim separate deductions. Section 80C allows for a deduction of up to Rs. 1.50 lakh for both owners. Deductions for loan interest paid up to Rs. 2 lakh are also available to both co-owners. The interest deduction is unrestricted if the residence is rented out, and each party may claim deductions according to their respective percentage of possession of the property. 

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Conclusion

An excessive tax burden may prevent you from saving or investing as much as you should. As a result, there are plenty of tax-saving techniques that might assist you in keeping the majority of your earnings. Even though the Income Tax Act offers a number of tax breaks, real estate investment is one of the best ways to reduce taxes and protect yourself against any potential depreciation losses.
 

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Those who invest in real estate or are purchasing their first house are eligible for a number of tax breaks from the government. This post covers some very helpful and perceptive aspects if you are seeking for the best property to invest in India.

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