Some of us think that taking a loan to buy a residential property is not a good idea and so, they start saving some amount from their monthly income into recurring investment or a Systematic Investment Plan (SIP) offered by mutual funds.

However, financial planners recommend that for acquiring a house for self use, one should go for a housing loan and pay EMIs in place of going for recurring investment or SIP in other investment product. Let's discuss the benefits of taking a home loan under income tax provisions.

One can get tax benefits through home loan under two different Sections of Income Tax Act.

a) Under Section 24 - Deduction on interest on home loan for self-occupied property up to Rs 2 lakh.

b) Under Section 80C - Deduction on repayment of principal amount on home loan up to Rs 1.5 lakh. Let's take an example that Mr. X takes a home loan on which he pays Rs 1 lakh as EMI, i.e. Rs.12 lakh in one year. Out of Rs 12 lakh which he pays every year, Rs 4 lakh goes towards repayment of principal home loan and the remaining Rs 8 lakh towards the interest of the loan.

Tax Benefits under Section 24 and Section 80C: Mr. X is eligible to claim tax benefits under Section 80C for the principal repayment of the home loan and under Section 24 for interest components. He can claim deduction up to Rs 1.5 lakh along with all other permissible instruments like, life insurance premium, PPF, ELSS, NSC etc under Section 80 C and up to Rs 2 lakh under Section 24. Total deduction will be Rs 3.5 lakh and if Mr. X is in the highest tax slab, he will get a tax benefit of Rs1,05,000.

Tax Benefits on Joint Home Loan: One can avail tax benefit on home loan up to Rs 1.5 lakh under Section 80C and 2 lakh under Section 24. But if you go for a joint home loan along with your spouse in the ratio of 50: 50, then both of you can claim these benefits separately. So the combined limit will be Rs 3 lakh under Section 80C and 4 lakh under Section 24. This can reduce your overall cost of loan for the family considerably.
Total deduction will be Rs 7 lakh and if both spouses are in the highest tax slab, they will get a tax benefit of Rs 210000/- which is just double compared to an individual home loan, although this provision may vary from person to person.

Before going for a joint home loan, you should mutually work out your ownership share if you wish to optimize the tax benefit. That is, if you and your spouse own the house jointly in the ratio of 50:50, both can claim deductions in equal proportion. Therefore, if your tax slabs are different, you need to work out your ownership share in a manner that the spouse in the higher tax bracket owns a bigger share.

On November 08, 2015 by www.taxexcel.net

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First time individual home buyers can get tax deduction on interest of home loan, under newly inserted section 80EE of the Income Tax Act, applicable for assessment year 2014-15. This is in addition to tax rebate on interest payment of home loan, under section 24.

Eligibility for 80EE rebate. This rebate on home loan interest is applicable only for home loans satisfying the following conditions:

i. Loan is sanctioned by a financial institution or housing finance company between 1st April 2013 and 31st March 2014.

ii. Loan amount is Rs 25 lakhs or less and cost of residential house is Rs 40 lakhs or less

This should be the only house owned by the taxpayer at the time of sanction.

Maximum deduction limit under 80EE

Up to Rs 1 lakh can be claimed towards interest payable on home loan in the financial year 2013-14. If interest payable in this year is less than Rs 1 lakh then the balance can be claimed in the following year.

For instance if interest payable in FY 2013-14 is Rs 75,000 then tax rebate on remaining Rs 25,000 can be claimed in FY 2014-15.

The amount claimed under 80EE cannot be claimed for tax rebate under any other sections in any year.

How to get 80EE tax benefit

You can either produce  certificate from your lender to the HR and get deduction on salary TDS or you can deduct the amount from total income while filing income tax return.

On March 20, 2015 by www.taxexcel.net

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A house, besides being a long-term asset, makes you eligible for significant tax breaks as well. You can claim deduction up to Rs 1.5 lakh for repayment of home loan principal under the overall limit of Section 80C of the Income Tax Act. Moreover, you can claim an additional deduction of up to Rs 2 lakhs under Section 24B for interest payment once you get possession and occupy the house.

Also, a joint loan means each of you can claim both these deductions individually, thus optimising your tax savings. If you have paid your municipal taxes in the current year, you can show them as deductions from your total income. A flat 30% of the annual value can also be claimed as deduction for maintenance expenses such as repairs, insurance, etc., irrespective of the level of actual incurred expenditure.

All this is common knowledge and we all know these rules. Here are some lesser-known tax deductions many of us miss out on:

Rebate on Interest Paid Before Possession: Any pre-construction interest is also allowed for deduction only if your project gets completed within 3 years of starting of the construction. Once the house is ready, you can claim the deduction for it within five years from possession in equal installments within the Rs 2 lakhs under Section 24B.

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However, if you rent out the property, you can claim the entire interest component as deduction from the rental income as in case of rented property, the actual interest payable is eligible for deduction, thus not being subject to any maximum limit. This applies even in the case where you have two home loans for two different properties, where one is self-occupied and the other is on rent.

  Rebate on Renovation Loan: If you have taken a home improvement loan for reconstructing or repairing of your property, you are eligible for a deduction under Section 24(b). This is over and above the flat 30% deduction available annually for the maintenance of property. However, there is a restriction on the amount—Rs 30,000 per fiscal, irrespective of whether it is self-occupied or you rent it out. In case you are already serving a home loan and are availing of the full tax benefit limit on interest paid, that is, Rs 1.5 lakh, then this additional benefit won't be available to you. But if, say, your the interest paid on the home loan is Rs 2 lakhs or below, then you will be able to claim the full Rs 30,000 as deduction, provided you have actually paid that much interest during the year.

Special Offer Under 80EE: The financial year 2013-14 was especially beneficial for first-time home-buyers. The finance minister in his budget speech announced an additional tax deduction of Rs 1 lakh for interest payments on new loans up to Rs 25 lakh, provided value of residential house does not exceed Rs 40 lakh. So, the total deduction under Section 24B for 2013-14 will be Rs 2.5 lakh. Although this is a one-time benefit and it can be claimed over two financial years in a piecemeal manner, that is, one may claim benefit spreading it over FY 2013-14 and 2014-15, however, if your interest component is more than the deduction limit, the balance can also be claimed in the next financial year. Since affordable housing is one of the top agendas of the government, we can expect such special sops in future as well.

Source from Economic Times

On November 19, 2014 by www.taxexcel.net

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First time individual home buyers can get tax deduction on interest of home loan, under newly inserted section 80EE of the Income Tax Act, applicable for assessment year 2014-15. This is in addition to tax rebate on interest payment of home loan, under section 24.

Eligibility for 80EE rebate

This rebate on home loan interest is applicable only for home loans satisfying the following conditions:

i. Loan is sanctioned by a financial institution or housing finance company between 1st April 2013 and 31st March 2014.

ii. Loan amount is Rs 25 lakhs or less and cost of residential house is Rs 40 lakhs or less

This should be the only house owned by the taxpayer at the time of sanction.

Maximum deduction limit under 80EE

Up to Rs 1 lakh can be claimed towards interest payable on home loan in the financial year 2013-14. If interest payable in this year is less than Rs 1 lakh then the balance can be claimed in the following year.

For instance if interest payable in FY 2013-14 is Rs 75,000 then tax rebate on remaining Rs 25,000 can be claimed in FY 2014-15.

The amount claimed under 80EE cannot be claimed for tax rebate under any other sections in any year.

How to get 80EE tax benefit

You can either produce  certificate from your lender to the HR and get deduction on salary TDS or you can deduct the amount from total income while filing income tax return.

On September 23, 2014 by www.taxexcel.net

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