If imagining about having a dream home one day can make you happy, imagine how it will be to live in that home one day. That feeling is beyond measures and cannot be expressed. How far will you go to buy a home? Or, what things will cross your mind before buying a home? You might check for various home loans available, check for what’s the quickest way to get a home loan, best home loan offer, low interest rate, research, talk to people, take suggestions, ask for experience, analyse, re-analyse, calculate expenses, plan your EMIs, save and much more. But, will you think about the benefits of buying a home? Of course, you would think you don’t have to pay rents anymore and your children will grow up in a space of their own. But, there’s more to buying a home and that is, it helps you save your hard-earned money by becoming a major source of saving tax and that’s the biggest advantage you enjoy.
The government of India shows great interest in encouraging citizens to invest in a house irrespective of any city or state. A home loan is eligible for tax deduction under section 80C. And when you buy a house under a home loan, it offers multiple tax benefits that contributes in reducing your tax outgo. Now, you can claim the tax benefit on the home loan during the repayment process of the home loan. The repayment process is bifurcated into two different things while availing the tax benefit, i.e.
- Repayment of the principal amount: Section 80C of the Income Tax Act supports the deduction of tax on the repayment of the principal amount. Under this, it is stated that out of the amount paid by home-buyers or HUF (Hindu Undivided Family) on the principal amount of the home loan, Rs. 1.5 lakhs should be deducted for tax benefit.
- Repayment of the interest amount: Section 24 and Section 80EE (for first time home loan buyers) allow the deduction of tax on the repayment of the interest amount. Under Section 24, homeowners can enjoy the tax benefit of Rs. 2 lakhs on the interest of the home loan taken from any financial institution or bank and can reduce the tax amount. Section 80EE of the Income-tax Act is applicable to the owners who are taking up the loan for the first time and acts on the interest paid on the home loan. The deduction is exclusively introduced for those people who pay the interest on their home loan up to Rs. 50,000 in a single financial year.
Wondering if taking home loan for saving tax advisable? Yes. In fact, a home loan is an effective way to save your tax.