7 Home Loan Tax Benefit that You Should Know
Jun 03, 2017 Home Loan
If you are looking to buy a house through home loan then these are benefits that you should keep in your mind. Also, the latest Union Budget-2017 has brought some joy for the taxpayers.
Some of the key points are discussed below:
Tax benefits can be claimed even if the EMI is missed: Under section 24 of I-T act interest payable on home loan comes under the tax benefit slab even if you have missed the EMI payment in a year. To claim this one should have the interest certificate issued by the financial institutions, however, the principal payment deduction, which comes under Section 80C is only available on actual payments.
If the property is sold before 5 years principal repayment tax benefit is reversed: Union Finance minister Mr Arun Jaitley proposed that the holding period of a property qualifying for long-term gains will be reduced to two years instead of three years.
However, if you sell the property before 5 years of buying the property or from the date of taking the home loan then the tax benefit gets reversed. The deduction claimed will be added back to your income in the year which it was sold.
The tax benefit will only be entitled if you are a co-owner of the property: Tax benefit cannot be claimed if your name is not mentioned in the property document or if you are not the co-borrower on a home loan even if you are the owner of the property and paying the EMI’s.
Pre-construction interest can be claimed up to 5 years: Interest paid during the construction period of the property can be claimed for tax relief only after receiving the completion certificate. This can be claimed in five equal instalments after the completion year of the property. The tax benefit will be calculated as the total annual tax payable plus one fifth of the pre-construction interest amount.
Section 80EE is re-introduced: Union budget has reintroduced Section 80EE which will provide a relief to the home buyers, however, the maximum deduction has been reduced to Rs 50,000 instead of Rs 1,00,000 which was there initially.
This deduction, however, has some below mentioned conditions:
a)This deduction is only applicable for the first time home buyers even if it is bought in joint ownership.
b)Loan amount must not exceed Rs 35 lakhs and the property value must not be more than Rs 50 lakhs.
c)The loan has been sanctioned by Financial institutions or Housing Finance Company.
d)As of the date of sanction of loan, no other house is owned by you.
Processing fees fall under Tax deductions: All processing fees/service fee and prepayment charges qualify for tax deduction under the Section 2 (28A) of IT-Act. Also, the stamp duty and registration fees paid by the individual are also tax deductible under Section 80c (2) (xviii) (d) with a maximum benefit of Rs 1.5 lakhs.
Loans from relatives, friends and employer are also tax deductible: If a loan is availed other than any financial institutions like family members or employer for owning the property, then also its tax deductible under Section 24 for interest payment of loans. For claiming this taxpayer need to obtain the certificate from the lender, which would have the details of the property, the amount of loan taken and the amount of interest payable.
The tax benefit would be applicable only on the interest amount and not on the principal repayment.
Some of the key points are discussed below:
Tax benefits can be claimed even if the EMI is missed: Under section 24 of I-T act interest payable on home loan comes under the tax benefit slab even if you have missed the EMI payment in a year. To claim this one should have the interest certificate issued by the financial institutions, however, the principal payment deduction, which comes under Section 80C is only available on actual payments.
If the property is sold before 5 years principal repayment tax benefit is reversed: Union Finance minister Mr Arun Jaitley proposed that the holding period of a property qualifying for long-term gains will be reduced to two years instead of three years.
However, if you sell the property before 5 years of buying the property or from the date of taking the home loan then the tax benefit gets reversed. The deduction claimed will be added back to your income in the year which it was sold.
The tax benefit will only be entitled if you are a co-owner of the property: Tax benefit cannot be claimed if your name is not mentioned in the property document or if you are not the co-borrower on a home loan even if you are the owner of the property and paying the EMI’s.
Pre-construction interest can be claimed up to 5 years: Interest paid during the construction period of the property can be claimed for tax relief only after receiving the completion certificate. This can be claimed in five equal instalments after the completion year of the property. The tax benefit will be calculated as the total annual tax payable plus one fifth of the pre-construction interest amount.
Section 80EE is re-introduced: Union budget has reintroduced Section 80EE which will provide a relief to the home buyers, however, the maximum deduction has been reduced to Rs 50,000 instead of Rs 1,00,000 which was there initially.
This deduction, however, has some below mentioned conditions:
a)This deduction is only applicable for the first time home buyers even if it is bought in joint ownership.
b)Loan amount must not exceed Rs 35 lakhs and the property value must not be more than Rs 50 lakhs.
c)The loan has been sanctioned by Financial institutions or Housing Finance Company.
d)As of the date of sanction of loan, no other house is owned by you.
Processing fees fall under Tax deductions: All processing fees/service fee and prepayment charges qualify for tax deduction under the Section 2 (28A) of IT-Act. Also, the stamp duty and registration fees paid by the individual are also tax deductible under Section 80c (2) (xviii) (d) with a maximum benefit of Rs 1.5 lakhs.
Loans from relatives, friends and employer are also tax deductible: If a loan is availed other than any financial institutions like family members or employer for owning the property, then also its tax deductible under Section 24 for interest payment of loans. For claiming this taxpayer need to obtain the certificate from the lender, which would have the details of the property, the amount of loan taken and the amount of interest payable.
The tax benefit would be applicable only on the interest amount and not on the principal repayment.
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