People also have the option to choose a new system of income tax. Tax rates are lower in this. However, no tax exemption and deduction is available.
If your home loan is going on or you have recently taken a home loan, then you can take many types of tax benefits on the payment of its installments. Apart from this, the additional tax benefits announced on the home loans in the previous budgets are still in place.
The point to note is that you can continue with the old system of income tax for the current financial year. In the old system of income tax, many tax exemptions like HRA and various deductions under section 80C and 80D can be claimed. People also have the option to choose a new system of income tax. Tax rates are lower in this. However, no tax exemption and deduction is available.
Come, let us know about all those tax benefits which are available to the people on the payment of EMI of home loan. The benefit of this will be only on choosing the old system of income tax.
1. Deductions on the home loan principal repayment
Your EMI consists of two components. Principal repair and payment of interest. Repayment of principal or principal amount of EMI can be claimed under section 80C. This advantage is available in the case of self-occupied property.
If the other house is empty or your parents live in it, then it is also considered as self occupant. Abhishek Soni, CEO and founder of ITR filing firm Tax2Win.com, says, “If the home loan of both houses is in progress, then the deduction can be claimed on the repair of the principal amount of both of them.” It is up to a maximum of 1.5 lakh rupees. ”
If you have rented your second house, then it is called ‘let out property’. Deduction is also available on the let out property under section 80C. The stamp duty and registration charge you pay at the time of buying the house can also be claimed under section 80C.
2. Deductions on payment of home loan interest
Apart from the repair of the principal amount of the home loan, you can also claim deduction on payment of its interest. Deduction is available under section 24 on payment of home loan interest. In case of self-occupied property it is up to a maximum of 2 lakh rupees in a financial year. Interest payments of more than Rs 2 lakhs can neither be carried forward nor adjusted with any other income.
If you have two houses and the other house is vacant or your parents live in it, then there is a benefit of rebate under section 24 on the interest of the home loan of the second house. The thing to keep in mind here is that deduction can be claimed up to a maximum of 2 lakh rupees in a financial year on the payment of home loan interest of both the houses.
3. Additional deduction on purchase of affordable home.
If you buy a house in Affordable Housing category, additional deduction is available on payment of home loan interest. This deduction can be claimed under section 80 EEA. The maximum amount for this has been kept at Rs 1.5 lakh. This deduction is different from section 24 under exemption of 2 lakh rupees. In this way, if a buyer is buying a house under Affordable Housing category, then he can claim deduction up to Rs 3.5 lakh.
You have to fulfill certain conditions to claim it.
1.The loan should be taken from financial institutions like home loan bank or housing finance company;
2.Home loan taken between 1 April 2019 to 31 March 2021;
3.The stamp duty of the house property does not exceed Rs. 45 lakhs;
4.Taxpayer should not have another residential property till the date of loan loan;
5.Taxpayer should not be eligible to claim deduction under section 80EE.
4. Deductions under section 80EE
This deduction was brought back in the financial year 2016-17 for people buying homes for the first time. Taxpayers taking home loans in the financial year 2016-17 have been allowed to claim additional tax deduction up to Rs 50,000 under section 80EE. This deduction is different from deduction up to Rs 2 lakh available under section 24.
There are some conditions to claim this deduction.
1.In the context of loan interest, it is available only for buying residential house property.
2.This is only for first time home buyers.
3.Additional benefit limit is up to Rs 50,000.
4.The property for which the loan is being taken should not cost more than Rs. 50 lakhs.
5.The loan amount cannot exceed Rs. 35 lakhs.
6.The loan has been registered between 1 April 2016 to 31 March 2017.
In this way, if all the home loan related deductions are merged, you can get deduction up to a maximum of Rs. 5 lakhs (Rs. 2 lakhs in section 24 / Rs. 1.5 lakhs in 80C and Rs. 1.5 lakhs in 80 EEA). The condition is that you meet certain defined parameters. If you are thinking about buying a new house, then plan in such a way that you get maximum deduction on this loan.
