Did you know that you can avail tax benefits on your home loans? That means the amount that you pay for installment payments is allowed to be deducted from your overall taxable income. However, the entire amount cannot be deducted, and there are also several other rules that govern this tax rebate. Read on to know more about such home loan tax benefits and don’t let your EMIs eat into your monthly budget.
How are tax benefits determined?Your EMIs are divided into two main components i.e., the principal amount and the interest amount. The home loan tax exemption levied by the government is given on either of the components. You can claim tax benefit for the interest amount in your EMI under Section 24 of the income tax act.
Everything about Section 24Section 24 states that interest component in your installment payment is allowed as a deduction. If there is any income from the house property, then it will be reduced from the deductible interest amount. A maximum of Rs. 2 Lakhs can be claimed as a deduction for a self-occupied property. Apart from the home loan borrowed for the purchase of property, other loans borrowed for construction of the house, renovation, repair, and reconstruction are also eligible for tax benefits under Section 24.
If your property is not self-occupied, then you can claim the whole interest payable as a deduction. However, one exception for this rule is that if you are moving away for employment or professional reasons, then the total deduction allowed is limited to Rs. 2 Lakhs.
If the property for which the home loan is borrowed and for which the deductions are filed is not acquired or constructed within five years from the date of sanction of the loan, then the total deduction allowed will be reduced to Rs. 30,000 only.
Unlike other tax benefits, Section 24 allows deduction on an accrual basis and not on a payment basis. That means you can claim a deduction when the expenses are incurred and not on actual payments and receipts.
Now that you know a fair deal about tax benefit under Section 24 don’t forget to claim the deductions and save up some big bucks!
Learn more about your Home Loan Eligibility here
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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