Purchasing a home isn’t just a significant milestone but also a monumental financial decision. Often, a home loan plays a key role in achieving this dream. Not only does it provide financial assistance, but also offers significant tax benefits. Read on to explore the various tax advantages you can avail on your home loans in India to save money.
The EMI you pay is made up of two components: the principal repayment and interest to be paid. You can avail tax benefits for both under Section 80C and Section 24(b) of the Income Tax Act, 1961.
Tax Benefits on Principal Repayment: Section 80C
The primary benefit of a home loan is the tax deduction on principal repayment under Section 80C of the Income Tax Act. You can claim a deduction of up to ₹1.5 Lakh on the amount you repay towards the principal every year. This deduction also covers the charges you pay related to stamp duty and registration fees, provided they are claimed in the same year the costs are incurred. However, it is important to note that to avail these tax benefits, the property should not be sold within five years of possession.
Tax Benefits on Interest Payment: Section 24(b)
Under Section 24(b) of the Act, you can also claim a tax deduction on interest paid on your home loan. For self-occupied properties, you can claim up to ₹2 Lakh Per Annum on the interest of your home.
Additional Benefits for First-Time Home Buyers: Section 80EE and 80EEA
First-time home buyers have an additional advantage under Section 80EE and Section 80EEA of the Income Tax Act. It allows first-time homebuyers to claim deductions from their net taxable income. A maximum deduction of ₹50,000 and ₹1,50,000 can be claimed under Section 80EE and Section 80 EEA respectively on the interest of the home loan instalments.
This deduction is over and above the tax deduction on interest paid under Section 24(b) of the Income Tax Act. However, it is worth noting that you can claim a deduction depending upon when your home loan was sanctioned.
Conclusion
A thorough understanding of the tax laws and its benefits can make owning a home more affordable and financially rewarding. We hope this blog can help you in leveraging your home loan as an effective tool for tax savings, and significantly reduce your taxable income.
At Pyramid Lifestyle, we offer a range of housing projects that cater to various needs, along with the support you need for a seamless buying experience. Whether you’re buying your first home or looking for an investment property in Pune, explore our offerings to find one that aligns perfectly with your financial and lifestyle goals.
For more information on our projects, visit Pyramid Lifestyle today.
