Home loans are a big liability, but what if we tell you that they offer big tax benefits too? So what is the amount of interest that is acceptable? What are the conditions to it? What should you know about these benefits? Are you eligible to avail them? Stop, stop. We will answer all of these questions popping in your mind one by one. So let’s have a look at all these things.
Tax benefits on interest of home loan—
For individual applicant
For under constructed property
For joint owner
Tax benefits for individual applicant
Interest payable on home loan of self-occupied property is subject to a maximum tax deduction of 2 lakh. It can be set off against other income, in the same year. This reduces your tax liability. But to claim this, it is necessary that the acquisition or construction is completed within 5 years from the end of the financial year in which the loan was taken. Additional deduction of 50,000 for interest paid shall be allowed for first time buyers if certain conditions are fulfilled.
Tax benefits for under constructed property
According to Section 24 of IT Act, you can claim tax deduction against the interest amount that you have paid on your house during the pre-construction period.
The total interest paid during the pre-construction period is allowed for tax deduction in five equal installments during five successive years from the year in which construction is completed and property possession is given to you. The total interest allowable during these five years will be capped at Rs. 2 Lakh per year for self-occupied house. Click here to read more about Tax benefit on home loan in India.
Tax benefits for joint owner
A house can be bought in joint ownership. Similarly, you can also involve a joint applicant to take a home loan. Doing so not only to improve the amount of the loan, it also allows both the borrowers to become eligible to claim tax benefit against the same house. In this case, each of the co-applicants can avail tax benefit individually. Each applicant and co-applicant can separately claim a maximum tax deduction of Rs. 2 lakh per annum for interest payment, under Section 24. In case you have a working son or daughter and the bank is ready to split the loan in three co-applicants, all three co-applicants can avail tax deduction up to Rs. 2 lakh each on self-occupied property.
House should be registered in the name of both the borrowers. The share of rights over the property should also be clearly stated in the registry papers. The division of interest can be claimed in the same proportion in which the asset is owned by each co-applicant.
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