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How Home Loans Help You Save On Taxes?
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One of the benefits of applying for a home loan is that it allows an individual to save up on taxes. There are a number of benefits that one can avail to save on taxes when your home loan has been approved by the financial institution. We provide you with a list of deductions one can claim for:
Deduction on interest
The EMIs one pays to the financial institution each month; the interest part of it can be claimed as a deduction by the borrower. Only owners who are also co-borrowers of the loan can avail this tax benefit from the government. The deduction can be claimed by the borrower at the beginning of each year. Every year one can claim a maximum of two lakhs on their house. The interest one pays to the Financial institution as a part of the home loan repayment can be considered as a loss under income from house property. The loss can be adjusted against other heads of income resulting in reducing the individual’s total taxable income.
Deduction on registration charges and stamp duty
Under section 80C Income Tax Act any payment which is made towards the registration charges and stamp duty demanded by the Financial institution can be reclaimed. These payments can only be claimed by the borrower in the year they have paid these charges.
Deduction on the principal repayment
The part of the EMI which the individual pays which repays the principal loan amount can be claimed under Section 80C of the Income Tax Act. The act allows an individual to claim a maximum of 1.50 lakhs as deduction.
Deduction on pre-construction interest
There is also a deduction an individual can claim before the construction of the house can been completed. One can start claiming this deduction on pre-construction interest in the same year. The deduction claims however, must not exceed two lakhs by the individual.
Deduction under Section 80EE
This deduction is for those who are first time homeowners with a house valued less than 40 lakhs. The loan amount on this is also required to be 25 lakhs or less. The maximum dedication one can claim is one lakh rupees.
When one is applying for a home loan, it is extremely important to conduct a detailed research to ensure that they are aware about all the aspects as well as tax saving options available to them. Many financial institutions also guide borrowers to help them get the most out of their home loan.
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