Owing to a House or planning to buy?
Paying income tax but don’t know how to plan for this. then this is the right time and source for you to plan your income to save income tax by wisely invest your hard-earned money in generating wealth or Capital Assets for you. 😀
Hey in this article, I am going to tell you a few things, using you can invest your money in the right place and save income tax.
Let’s start! 💡
In the budget 2020, FM had announced few additional tax benefits which are applicable for the FY 2020-21. If, you have an on-going home loan or have taken a home loan recently, then there are certain income tax benefits you can avail of on the EMIs paid.
Do remember that for the current financial year, an individual can continue to opt for the old tax regime and claim tax exemptions such as HRA and various deductions under sections 80C, 80D, etc.
Have a look at all the tax benefits that an individual can get on home loan EMI payments if he/she has opted for the old tax regime.
Deduction on repayment of the principal amount of home loan
The EMI paid by you has two components – principal repayment and interest paid.
The amount repaid as a principal component in the EMI can be claimed as a deduction under section 80C of the Income-tax Act, 1961 for self-occupied property.
Do remember if you have a second home that is empty or your parents are living in that house, then that second house will also be considered a self-occupied house.
If you have given your second house on rent, then it will be called ‘Let out a property.
Section 80C deduction can also be claimed for the stamp duty and registration charges paid at the time of buying a house.
Deduction on Interest paid on a Home Loan
Apart from the deduction on the principal amount repaid on a home loan, a taxpayer can also claim a deduction on the interest paid on the home loan.
Deduction on the interest paid on a home loan is available under section 24 for a maximum of up to Rs 2 lakh in a given financial year in the case of self-occupied property.
Amount of interest payment exceeding Rs 2 lakh will neither be carried forward nor be adjusted against any other income head such as capital gains, salary, etc. in case of self-occupied property.
Extra deduction on buying an affordable house
To claim this, there are certain conditions that must be satisfied which are as follows:
- Housing loan must be taken from a financial institution such as a bank or housing finance company for buying a residential house property;
- The home loan must be taken between April 1, 2019, and March 31, 2021;
- The stamp value duty of the house property should not exceed Rs 45 lakh;
- The taxpayer should not own any residential property as on the date of sanction of the loan; and
- The individual taxpayer should not be eligible to claim deduction under the existing section 80EE
Deduction under section 80EE
- The additional deduction with respect to interest on loan taken will be applicable only for residential house property.
- It’s only for first-time home buyers.
- The maximum additional benefit is capped at Rs 50,000 a year.
- The value of the house for which the loan is taken cannot exceed Rs 50 lakh.
- The loan amount cannot exceed Rs 35 lakh.
- The loan has to be sanctioned between April 1, 2016, and March 31, 2017.
So, all home loan-related deductions put together can help you get a maximum deduction of Rs 5 lakh (Rs 2 lakh u/s 24, Rs 1.5 lakh u/s 80C, and Rs 1.5 lakh u./s 80EEA) if it meets the specified conditions.
