Buying a home can be a pricey deal, involving a series of expenses such as stamp duty, registration fee, GST, etc. And, if you are buying an apartment, you will also have to pay for the parking space, interiors and maintenance costs. In addition to these, if you have availed a home loan, you will end up paying a lot of money as interest.
The additional charges, other than the basic cost of a house, add up to a huge amount. To aid property buyers availing home loans, the income tax law in India offers certain deductions that can be claimed at the time of tax payment. These deductions are essentially the tax benefits on a home loan. Listed below are some of the deductions that can be claimed by home buyers.
1. Deduction on interest component: If
you have availed a home loan on or after 1st of April 1999 to construct
or buy a property, you can get a deduction on interest component of an
amount up to Rs. 1.5 lakhs. However, this tax redemption can be enjoyed
only if the purchase or construction is completed within three years
from the end of the financial year in which the loan was availed.
the lending bank has to issue a certificate to state that the interest
is payable against the loan taken for the aforementioned purposes.
2. Deduction under section 80EEA: An additional deduction was introduced in the 2019 budget under Section 80EEA. According to this, you can avail up to Rs. 1.5 lakhs if the stamp value of the property has not exceeded Rs. 45 lakhs. To benefit from this deduction, you should get the loan sanctioned between April 1st, 2019 and March 31st, 2020. To avail this benefit, the individual shouldn’t own any other house anywhere in India.
3. Deduction on stamp duty and registration charges: You can also avail tax benefits on the stamp duty and registration charges of the house purchased under section 80C of the Income Tax Act. However, the benefit for this deduction is limited to Rs. 1.5 lakhs and can be claimed only in the year in which these expenses were incurred.
4. Deduction on principal repayment: The principal amount in the EMI paid during the year is allowed as a deduction under section 80C. The maximum limit of deduction that can be claimed is Rs. 1.5 lakhs. However, to claim this deduction, you must not sell the property within the first 5 years of possession. If so done, then the deduction claimed earlier is added back to the income in the year of sale and hence will be taxable.
5. Deduction on interest paid during the pre-construction phase: Quite often, people apply for a home loan for unconstructed sites and begin paying EMI’s right after availing the said loan. In a regular scenario, the eligibility to claim interest on the home loan as a deduction, begins only upon completion of construction or immediately if you buy a fully constructed property. However, the income tax law provides a claim for such interest, called the pre-construction interest. The deductions under this are claimed in five equal instalments starting from the year in which the property is acquired or construction is completed. Nevertheless, the maximum limit for this deduction is capped at Rs 2 lakh.
These tax deductions can save you a lot of money, which is otherwise spent on everyday expenses. The above pointers can bring you some clarity on tax deductions under certain sections of the income tax law. Whether you are a first-time home buyer or already possess a property in any part of the country, you can claim tax benefits as per the eligibility under the pertaining sections.
You can claim tax deductions under Section 80EEA if you buy a home at Swarna Griha, a 2BHK apartment project in Tumakuru. These Swarna Griha homes are available under the PMAY scheme that offers a subsidized rate of interest to buyers. To buy an apartment at Swarna Griha, contact us here.