Big purchases require significant amounts of money and a lot of planning. One such investment is a house, especially when you plan on buying it with a home loan. The key to buying a new home in 2021 will be through planning.
This will require using tools like Home Loan EMI Calculators and knowing what tax benefits you can get on the housing loan itself. So, let’s start with the tax benefits of home loans.
1. Benefits under Section 80 C*
You can claim tax benefits up to Rs. 1.5 lakhs under Section 80 C of the Income Tax Act. This benefit applies to the principal amount that is borrowed.
2. Benefits under Section 24 B
The tax benefits under Section 24 B are available for the interest paid on the home loan. These claims can be made up to a maximum of Rs. 2 lakhs.
3. Benefits under Section 80 EE
This is a benefit available only for your first residential property, for which the loan was taken between April 2016 and March 2017. If the property’s value is less than Rs.50 lakhs and the loan you take is less than Rs.35 lakhs, you can claim benefits up to Rs.50,000 on the interest payable on the home loan.
4. Benefits under Section 80 EEA
If the property’s value is less than Rs.45 lakhs, and you don’t qualify for benefits under 80 EE, you can claim benefits under Section 80 EEA. The amount of benefits you claim is up to Rs. 1.5 lakhs, and it is available for the interest to be paid on loan.
5. Benefits on stamp duty & registration of home*
The amount paid as stamp duty can be claimed under Section 80 C. This is a one-time benefit that can be claimed only in the year that the stamp duty is paid.
6. Tax benefits on if the home is rented out
If you have rented out the house you bought, you can claim benefits for the home loan’s interest starting from the year the construction is completed. There is no limit on the amount you can claim.
7. Tax benefits for joint home loans
If you have taken the loan and another person like a spouse or family member, you and the co-applicant for the loan can claim tax benefits under 80 C and 24 B. However, the one condition you must satisfy is that the co-applicant must also be named the house owner.
8. HRA benefits on a home loan
In some instances, you may not be able to move into your house for several reasons like construction work, distance from work, the house being in another city etc. In such cases, you may find yourself renting a house and repaying a home loan. In such cases, even though you own a house, you can claim the tax benefits on your home loan AND claim HRA (house rent allowance) from your company for the rented house.
* Please note that deduction under 80 C is limited to a cumulative amount of Rs. 1.5 lakhs, i.e., home loan claims, insurance claims, investment claims, etc., all adding up to Rs. 1.5 lakhs. So, if you have claimed Rs. 20,000 for life insurance premium and Rs. 30,000 as ELSS investments, then you’ll only be able to claim Rs. 1 lakh for the home loan principal, stamp duty and registration charges.
To help you plan your home loan correctly, you will need to use a Home Loan EMI Calculator. The Home Loan Calculator will allow you to visualize the monthly repayments that you will be required to make. This calculator also acts as a Home Loan Eligibility Calculator, meaning that it tells you the EMI you have to pay and shows you if how much of the loan are you eligible for.