The above-listed provisions offer a glimpse into the significant savings that one can claim on their income tax liabilities.
Nevertheless, you should also understand the various terms and conditions, along with the applicable Sections, under which such savings are applicable:
1. Section 80C (Deduction on Home Loan Principal Repayment)
Taxpayers can claim this benefit only once, with maximum deduction limited to Rs.1.5 lakh in a particular financial year.
However, besides the principal repayment sum, this particular benefit calculation also considers associated costs of buying the concerned property, such as stamp duty and registration charges.
2. Section 24 (Deduction on Home Loan Interest Payments)
You can claim maximum deductions of up to Rs.2 lakh on your income tax liabilities, based on home loan interest payments.
However, to claim this, the property in question must complete its construction within 5 years. Failure to do so will reduce savings potential to just Rs.30000 for taxpayers.
3. Section 80EE (Tax Deduction on Home Loan Interest For First-time Property Buyers)
This section only applies to you if you have no other property to your name. Other conditions that must be met to claim this additional benefit are:
- The home loan principal amount should not exceed Rs.35 lakh.
- The property should not be valued at more than Rs.50 lakh.
Apart from these provisions, you can also seek tax deductions under Section 80EEA in case of affordable housing.
Under this, taxpayers can claim an additional Rs.1.5 lakh tax savings on home loan interest payment, besides the interest-related rebates offered under Section 24. You can keep claiming this benefit until full repayment of home loan.
Additional conditions to consider here is that most of these tax exemptions are only applicable after the construction of a property is complete. If you are buying a ready-to-move property instead, these benefits will start from the get-go.
Moreover, if you decide to sell the concerned property within 5 years of acquisition, your claimed tax benefits till that point are considered void. These will be added to your taxable income during the next assessment.
As you can see, income tax rebate on home loans can lead to massive savings for an individual.
But, what happens in case of a joint home loan? Which of the borrower is liable to claim income tax deductions in such cases?