While taking a home loan is one of the best ways to finance your dream house, there are some other benefits that come with this type of loan. One of the perks of taking this type of loan is the tax benefit. The government encourages new home buyers to build their own home by offering several tax concessions and rebates on home loans.

Sections Under Which You Can Claim Tax Benefits

At present, you can avail tax benefits under the following sections of the Income Tax Act, 1961 when you repay a home loan:

1. Section 80C: 

Under Section 80C, you can get tax benefits of up to Rs. 1.5 Lakhs for repaying the principal amount of your home loan. However, you can claim the tax benefit only after the construction of your house is complete. If you are purchasing a ready-to-move property, you can immediately get a housing loan tax benefit under this section.

2. Section 24:

Section 24 allows you tax benefits of up to Rs. 2 Lakhs towards the interest paid for the home loan. However, the tax benefits are applicable only for purchasing a self-occupied property. Additionally, you are eligible for the tax benefit only if the construction work is over in 5 years.

3. Section 80EEA: 

This section is specifically for the benefit of first-time home buyers. If your residential property meets certain conditions, you can be eligible for an additional tax benefit of up to Rs. 1.5 Lakhs for repayment of interest paid against your home loan.

How to Claim Housing Loan Tax Benefit?

The Income Tax Department lays out an easy process to claim the tax benefits against your home loan. However, you must have the following documents to get these tax benefits:
  • Property ownership certificate stating that you are the owner of the residential property. In case of jointly owning a property or a joint home loan, you must be the co-owner of the house/apartment.
  • Loan Interest Certificate to confirm the break-up of interest and principal amount repayment for a particular financial year.
  • Construction Completion Certificate from your builder for under-construction property.Similarly, a builder issues a certificate to establish the date of purchase for ready-to-move property.

Optimizing Home Loan Tax Benefit

The simplest way to claim these home loan tax benefits is by providing all these documents to your employer to adjust your Tax Deducted at Source (TDS) if you are a salaried professional.  Alternately, you can avail these benefits by filling out relevant fields under the above sections while filing your IT returns.

Lastly, make sure you check all the pre-requisites of claiming the tax benefits before availing the home loan from your preferred financial institution.

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DISCLAIMER

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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