Tax Benefits for Various Sections of Home Loan:
The tax benefits under various sections of the Income Tax Act not only attract people who need a loan put is also beneficial for people who can pay out of there on the source of savings, as it provides them flexibility in payment and they need not do away with their liquidity.
Let’s first note the various income tax provisions under which tax benefits are available to the taxpayers.
Download & Prepare at a time 50 employees automated Income Tax Form 16 Part B for F.Y.2016-17 [ This Excel Based Software can prepare at a time 50 employees Form 16 Part B as per the Finance Bill 2016-17]
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Form 16 Part B
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Form 16 Salary Structure
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Main Data input sheet for Filling the Form 16 Part B
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- Tax Benefits for Interest paid on housing loan: Repayment of housing loan is through Equated Monthly Installments (EMI) which consists of principal and interest component. The interest component of the EMI is allowed as a deduction under the head ‘Income from Housing Property’, u/s 24 of the Income Tax Act. The amount permissible for deduction is Rs. 2,00,000/- for AY2017-18. Further, in case the house against which loan is taken is given on rent, there is no cap on the amount of interest allowed as deduction.
- Tax Benefits for Repayment of principal on Home Loan: The principal component paid out of the EMI is permissible as a deduction up to Rs. 1,50,000/- under section 80C of the Income Tax Act.
- Interest paid during the pre-construction period on Home Loan: Interest deduction cannot be claimed for under construction property. However, once the construction is completed, the amount of interest paid on the loan borrowed prior to completion, which is ‘Pre-construction interest’, can be claimed as a deduction in 5 equal installments from the financial year in which construction is completed. Further, construction has to be completed within 5 years from the end of the financial year in which loan is taken.
- Higher deduction in case of a Joint Home loan and ownership: In case both husband and wife are working, the deduction with respect to interest on the home loan and repayment of principal can be claimed by both in the proportion to their ownership share.
Download Automated 50 employees Income Tax Form 16 Part A & B for F.Y. 2016-17 [ This Excel Utility can prepare at a time 50 employees Form 16 Part A &B for F.Y.2016-17]
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Form 16 Part A &B
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Avail both Home loan deduction and House Rent Allowance (HRA) exemption: The deduction u/s 24 (Interest on a home loan) and u/s 80C (Repayment of principal) can be claimed along with exemption of HRA. For e.g. A person has bought a flat in Pune and taken a home loan for the same. However, due to his job requirement, he needed to shift to Mumbai in a rented apartment. In this case, he can claim rent paid for the Mumbai Property as HRA exemption [u/s 10(13A)] along with a deduction of interest and principal for the Pune property.
Download Automatic House Rent Exemption Calculator U/s 10(13A)
