Owning your own house is every man’s dream. It is a necessity & nothing beats it if you can also save some taxes in the process. Buyers can claim income tax deduction on both the principal repayment & the interest payment under different sections of the IT Act.
Tax Deduction on home loan Interest: (Section 24): The EMI of a home loan is divided into 2 parts, interest payment & principal repayment; Home buyers can claim a deduction of up to Rs.2 lakhs on the interest payment component if the owner or his family members resides in the house property.
Tax Deduction on principal repayment: (Section 80C): Home buyers can claim deduction on principal repayment for up to Rs.1.5 lakhs. One thing to keep in mind is that that property should not be sold within 5 years of possession or else the deductions claimed earlier will be reversed in the year of sale.
Tax Deduction for Stamp Duty & Registration charges: (Section 80C): Home buyers can also claim deduction for stamp duty & registration charges within the overall limit of Rs.1.5 lakhs. These can be claimed only in the year in which the expenses are paid.
Tax Deduction for 1st time home buyers: (Section 80EE): This section was recently added to the income tax act providing 1st time home buyers tax benefit upto Rs.50000. The cost of the home loan should be less than Rs.50 lakhs.
With home loan interest rates at near all-time lows and numerous benefits being offered by developers this can be a good time to invest in a new home for you.
Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 9 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata.He also manages a portfolio on the online platform Kristal. Find link to the strategy named ‘The Tortoise’