What are the Tax Benefits of the Home Buyer?
Jun 12, 2017 Legal Guidance
Taxes are a necessary evil. Sometimes they drain us, sometimes we question its importance, but regardless you cannot overlook the benefits of taxes. A proper knowledge of the taxes and their savings can help you in a huge way financially.
When it comes to real estate, the government has given both the buyers and builders some relief where they can enjoy the tax benefit. Whether be it renting, buying or selling, there are provisions for every property transaction in the tax benefit.
To understand the tax benefit better we will discuss three sections of it:
1. 80C:
The amount paid by the buyer to the bank as the principal repayment of the amount, a tax deduction is allowed for this case. The maximum tax benefit that is allowed is Rs 1.5 lacs. It includes all the savings made in provident fund (PF), national saving schemes, senior citizen saving scheme. The tax deduction in this section is allowed for the renovation and extension of the house after the construction of the property is completed.
2. 24B:
This section deals with the interest paid by the buyer. The exemption allowed in this is Rs 2 lacs for a self occupied property. And the loan can be taken for renovation, reconstruction, repair, renewal or purchase of a property.
In case the property under reconstruction or renovation is not self occupied then the entire home loan interest can be claimed.
Also, if the construction of the property is not completed within 5 years of the loan taken, then the loan limit reduces from 2 lacs to Rs 30,000.
3. 80EE:
This section covers the tax benefits enjoyed by the first time buyers. It provides an additional deduction of Rs 50,000 over Rs 2 lacs. This can be availed from the financial year 2016-17. The home loans sanctioned between April 1, 2016, and 31st March 2017 can avail this benefit.
What if I sell the property before 5 years of buying it?
If you decide to sell the property before five years of buying it then the amount you have received from the sale will be added to your income and it will be treated as your yearly income. No further tax benefit will be available for you in this case.
What if I take the home loan from my relatives and friends?
In this case, only the interest amount for the loan payment will be allowed for deduction not the principle amount. To claim the same, the borrower needs to present the proper legal documents and the loan agreement.
What is the deduction available for the under construction property?
Banks give you the loan and the EMI starts soon after even if the construction of the property is still going on. If the possession of the property has not been taken under in the financial year, then there is no tax benefit in this case. Tax benefit is only given out if the under construction property is completed within the financial year.
Joint loan?
If you and your spouse have taken a joint loan then you both are entitled to enjoy the tax benefit separately.
Can I claim both HRA and home loan?
If you have taken a home loan and are living in a rented place then you can claim tax benefit under section 80C and 24B as well as HRA.
Tax benefit from missed EMI?
Lenders can claim tax benefit on the missed EMI by attaching a valid certificate for the same.
When it comes to real estate, the government has given both the buyers and builders some relief where they can enjoy the tax benefit. Whether be it renting, buying or selling, there are provisions for every property transaction in the tax benefit.
To understand the tax benefit better we will discuss three sections of it:
1. 80C:
The amount paid by the buyer to the bank as the principal repayment of the amount, a tax deduction is allowed for this case. The maximum tax benefit that is allowed is Rs 1.5 lacs. It includes all the savings made in provident fund (PF), national saving schemes, senior citizen saving scheme. The tax deduction in this section is allowed for the renovation and extension of the house after the construction of the property is completed.
2. 24B:
This section deals with the interest paid by the buyer. The exemption allowed in this is Rs 2 lacs for a self occupied property. And the loan can be taken for renovation, reconstruction, repair, renewal or purchase of a property.
In case the property under reconstruction or renovation is not self occupied then the entire home loan interest can be claimed.
Also, if the construction of the property is not completed within 5 years of the loan taken, then the loan limit reduces from 2 lacs to Rs 30,000.
3. 80EE:
This section covers the tax benefits enjoyed by the first time buyers. It provides an additional deduction of Rs 50,000 over Rs 2 lacs. This can be availed from the financial year 2016-17. The home loans sanctioned between April 1, 2016, and 31st March 2017 can avail this benefit.
What if I sell the property before 5 years of buying it?
If you decide to sell the property before five years of buying it then the amount you have received from the sale will be added to your income and it will be treated as your yearly income. No further tax benefit will be available for you in this case.
What if I take the home loan from my relatives and friends?
In this case, only the interest amount for the loan payment will be allowed for deduction not the principle amount. To claim the same, the borrower needs to present the proper legal documents and the loan agreement.
What is the deduction available for the under construction property?
Banks give you the loan and the EMI starts soon after even if the construction of the property is still going on. If the possession of the property has not been taken under in the financial year, then there is no tax benefit in this case. Tax benefit is only given out if the under construction property is completed within the financial year.
Joint loan?
If you and your spouse have taken a joint loan then you both are entitled to enjoy the tax benefit separately.
Can I claim both HRA and home loan?
If you have taken a home loan and are living in a rented place then you can claim tax benefit under section 80C and 24B as well as HRA.
Tax benefit from missed EMI?
Lenders can claim tax benefit on the missed EMI by attaching a valid certificate for the same.
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