Tax is a mandatory financial charge imposed by the government in order to fund government spending and several public expenditures. The failure to pay tax is also known as tax evasion and it is a criminal offense, punishable by the law. There are mainly two types of taxes in Indian Tax System which is Direct Tax and Indirect Tax. Their implementation differs from one another. They are further sub-classified into other taxes. Direct Taxes include Income Tax, Capital Gains Tax, Securities Transaction Tax, Perquisite Tax, and Corporate Tax. Indirect Taxes include Sales tax, Service Tax, Customs Duty on goods, Excise Duty and Value Added Tax (VAT).
Different Types of Home Loans
A home loan is a specified sum of money borrowed from banks and Housing Finance Companies to buy a house and the important factors that should be considered while looking for a home loan are:
- Interest Rate
- Loan amount and Affordability
- Loan tenure
- Monthly EMI’s on the loan and additional charges.
- Maintain CIBIL score
- Home loan eligibility check
- Read the documents carefully.
There are different types of home loan options available in home loans:
- Home Purchase Loans – Loan that’s taken to buy residential property like flats, bungalows, etc. The maximum loan that is offered by banks is 90% of the amount.
- Home Construction Loan – This loan can be availed by the owner of the land to meet the expenses of constructing a new house or to finish an incomplete project
- Home Improvement Loans – Loans that are given for renovation, repairing and refurbishing homes. They have very low-interest rates.
- Home extension Loans– Loans that are taken to extend or add more space to the existing home
- Land Purchase Loan – Loan availed to buy land or plots for construction or as an investment
- NRI Home Loans– Loan that is taken by NRIs for constructions or renovations of a property
- Balance Transfer– Transferring of an existing home loan from a bank/NBFC to another provider/lender
- Bridge Loan– It is a kind of loan taken by people who want to buy another property by selling an existing one. They are offered at high-interest rates.
Tax Benefits on Home Loans
There are many tax benefits available with home loans:
- Deduction for interest paid on housing loan – Under Section 24B, you can claim up to ₹ 2 Lakh for the accrual and payment of interest on a home loan
- Interest Deduction for property under construction – Section 24B of the ITA allows yearly pre-construction interest deduction with total interest paid divided into 5 equal installments within the annual cap of ₹ 2 Lakh
- Principal Component Deduction – Under Section 80C, you can claim deduction unto ₹ 1.50 Lakh for the principal repayment done in the financial year
- Deductions on a Joint home Loan – Each borrower can claim a deduction of principal repayment (section 80C) and interest payment (section 24B) if they are also the co-owners of the property
- Deduction of stamp duty and registration – Borrowers can also avail stamp duty and registration deductions of up to ₹ 1.5 Lakh according to section 80C. These deductions are claimable only in the year the payment was made.
Considering the present economic scenario, it is the right time to invest in residential properties by taking a home loan as you can take advantage of reduced stamp duty till the end of 31st March, 2021.
At Pyramid Lifestyle, the tax benefits on your home loans, will prove to be an advantageous one. With our projects located in the most prominent destinations in Pune, and an added benefit of reduced stamp duty, our homes are certainly built to benefit you.