Home is your safe haven, and it protects you and your family in many ways, including financially. But for most people, a home is not affordable with the money they have in hand. The best option here is to turn to lenders that can provide an affordable home loan with a longer tenure.
Apart from providing you with the necessary finance to buy a home, your home loan can save you some taxes as well. But how does it work? Let’s take a deep dive and learn in what all ways you can save tax on your home loan.
- Savings under Section 80C
Under Section 80C, you can claim a tax rebate of up to Rs 1.5 lakh. But it comes with some restrictions. You can only claim for the principal amount that you have repaid. This might be the smaller component of your EMIs during the early years of repayment. Furthermore, the construction of the property should be completed for you to claim benefits and if you claim, you can’t sell the property for the next five years. If you happen to sell, the rebate you earned will be reversed.
- Savings under Section 24B
Section 24B of the income tax act provides for tax savings on the interest repayment of your home loan. However, there is a cap of Rs 2 lakh in this scenario. You can claim tax benefits hereunder two scenarios: pre-construction and post-construction.
During the pre-construction period, you can claim tax benefits on the interest paid as five installments. However, the construction should be completed within five years.
In the post-construction period, the house should be used for residential purposes only for you to claim benefits. This concession is also applicable for ready-to-move-in homes.
- Savings for joint home loans
Joint home loan applicants can also file for tax savings. Here, both the applicants can claim tax savings under section 80C and section 24B individually. The collective tax saving here is more than home loans with individual loan holders.
How to use a home loan tax benefit calculator?
Make use of a home loan tax benefit calculator to plan your tax saving. Such a calculator will dissect your EMIs to show you the interest and principal repayment component making it easier for you to file for tax savings. A tax benefit calculator will also help you with planning your repayments. These are easily available online for you to use for free.
Conclusion
A dream home is something you deserve and if the only thing that stands between you and that dream is money, it is a wise idea to apply for a home loan. While you are on that, make sure you use a home loan tax benefit calculator to help you claim tax rebates.
