Timely repayment of home loan has many benefits. Not only does it positively affect your credit score, but also saves a lot on income tax. We know that buying a dream house involves a lot of struggle and hard work. Investing in real estate and houses is a great option to get extra and profitable income.
A home loan is eligible for tax deduction under section 80C. When someone buys a home through a home loan, it comes with tax benefits. In this article, facts and important points related to the home loan have been elaborated so that people make the most and benefit.
Deductions made on home loan repayments:
Many schemes introduced by the Government of India encourage people to buy their own homes at low costs. This increases affordability and accessibility for common people. Here is an elaboration on a few deductions that are made for home loan repayment.
- Deduction for interest payment:
When a home loan is taken, the repayment of EMI is divided into two components, interest payment, and principal repayment. Additionally, a home loan should only be taken for the purchase or construction of a home to be completed within 5 years from the end of the financial year when the loan was taken. Under section 24, the maximum interest portion of the EMI paid for the year that can be claimed is up to 2lakhs INR only.
- Deduction on principal amount repayment:
The principal portion of EMI paid for the financial year is allowed as a deduction under section 80C. The maximum amount that can be claimed in tax benefit is up to 1.5Lakh INR only. However, to claim this deduction, house property should be in the name of the original owner after possession for up to 5 years. If not so, then the deduction claimed will be added to income in the year of sale.
- Stamp duty and registration charges deduction:
A deduction for stamp duty and registration charges can also be claimed. It can be claimed under the same section of 80C, besides principal amount repayment. The maximum amount that can be claimed is up to 1.5Lakh INR only again. Additionally, it is important to note that the claim is made only in the year in which the expenses have been incurred.
- Deduction under section 80EE:
Homebuyers can claim an additional deduction as well under section 80EE. The maximum claim that they can make is up to 50,000 INR. In order to claim this deduction, the amount of loan that should be taken should be up to 35Lakhs INR. Additionally, the value of the property should not be more than 50Lakhs INR.
- Deduction under section 80EEA:
In the budget introduced in the year 2019, additional deduction under the section 80EEA was maximum up to 1,50,000 INR. Homebuyers can claim this deduction only if the stamp value of a property is not more than 45Lakhs INR. Additionally, an individual claiming the deduction as a part of tax benefit should not be eligible under any other section like 80EE. On the last date of loan sanction, an individual should not own any other asset like a house.