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According to a report by Colliers International, the average age of homeowners has come down to 30 from 45+. Majority of individuals searching for properties belong to Tier I cities like Delhi (also NCR). Tier II cities like Goa, Kochi, Indore, and Jaipur also rank high on the list.
Making such purchases hassle-free for these first-time property buyers are NBFCs which add up borrower and repayment-friendly terms. They offer these secured loans at attractive rates of interest, long tenors, and high financing amounts. Another significant feature which makes these products beneficial is the home loan tax benefit that borrowers can claim.
Income Tax Exemptions For Home Loans
The following income tax rebates are available on home loans –
Under Section 80C – Up to Rs. 1.5 Lakh on the principal paid each year, stamp duty, and registration fee.
Under Section 24b – Up to Rs. 2 Lakh on the interest paid each year. Note that income tax saving on a home loan is only available after the completion of property construction. The exemptions for the pre-construction period are available in five equal instalments beginning from the year the house construction is complete.
There are NBFCs that offer Home Loans that come with income tax benefits under the Sections mentioned above. You can avail up to Rs. 5 Crore with tenors of up to 20 years and competitive interest rates.
Income Tax Exemptions On Other Loans
Benefits under the above two Sections are also available for the following loans:
Joint Home Loans
Borrowers availing a housing loan jointly can also claim home loan tax benefits. In such cases, they have to fulfil the following conditions:
Be co-borrowers of the loan and contribute to the monthly loans instalments.
Be co-owners of the property and have their names on the property documents.
Not sell the house within 5 years after completing the purchase or construction.
Complete the purchase or construction of the property within 5 years.
Each borrower can claim the maximum deductions set under Section 80C and Section 24b. Total sum of tax exemptions which can be claimed is Rs. 3 Lakh and Rs. 4 Lakh per year respectively.
Home Renovation Or Improvement Loan
A home renovation or home improvement loans also provides income tax benefits even though it is an unsecured loan. Borrower/s can claim deductions of up to Rs. 30,000 only on such loans under Section 24.
Personal Loan For Property Purchase, Construction, Or Down Payment
A personal loan can also provide income tax benefits provided it is used to purchase or construct a property.
Numerous home buyers also avail personal loans for the down payment on their home loan as lenders never finance the entire price of the house. In such cases, borrowers can claim deductions of up to Rs. 2 Lakh on the interest paid under Section 24b.
How To Calculate Income Tax Benefits On Home Loans?
Several financial institutions provide online home loan tax benefit calculators that precisely help you calculate the tax rebates you can earn throughout the year.
Some calculators require you to enter only your home loan amount, principal repaid, and interest paid to calculate your savings. You may have to refer to your home loan repayment schedule to find the yearly principal and interest.
Other calculators need you to provide your housing loan interest rates, loan amount, repayment tenor, date of commencement, yearly income, and any other exemptions under 80C to calculate your savings on income tax.
Calculate your income tax savings and make claims at the right time. Use a home loan EMI calculator to find your monthly instalments before you apply.