Do you own property? The key to tax saving then is right at home

NEWDELHI: When you buy a house, apart from the cost of the property there are additional expenses that you have to bear, such as stamp duty for registration of the house and payment of interest on the home loan taken for its purchase. To make it easy on the homebuyers’ pocket, incometax provisions allow claiming these expenses as deductions from income to some extent, and help individual assessees bring down their overall tax liability. Here are the incometax benefits that you can claim when you buy a house.

STAMP DUTY

Once you buy a house you need to register it in your name by paying the stamp duty and registration fee. The amount you pay as stamp duty for registration of a residential property can be claimed as deduction under section 80C of the Income-tax Act, 1961. Stamp duty is charged by the state government based on the property value. It varies from state to state and in some states it differs based on the gender of the homebuyer. For instance, in Delhi stamp duty is 4% and 6% if property is registered in the name of a woman and a man, respectively.

HOME LOAN EMI

Besides stamp duty, you can also claim tax deduction for repayment of a home loan. Your equated monthly instalments (EMIs) consist of principal and interest on the loan. The amount paid as principal repayment qualifies for deduction under section 80C of the Income-tax Act, which has an overall limit of ₹1.5 lakh. On the other hand, the interest component of the loan qualifies for deduction under section 24(b) of the Act. Deduction against interest, in case of a self-occupied house, is caped at ₹2 lakh. But if the house is rented out then the entire interest due becomes deductible. However, as proposed in the Finance Bill, from the next fiscal even in case of a let-out property one will not be able to claim more than ₹2 lakh as deduction in a year. Any amount above ₹2 lakh can be carried forward for eight assessment years for set-off.

FIRST-TIME HOMEBUYER

You can get an additional deduction under section 80EE of the Act if you are a first-time homebuyer. Under this section, an individual can claim additional deduction of up to ₹50,000 for the interest paid on the home loan. This is over and above the deduction of Rs2 lakh available under section 24(b) of the Act. The property value should be less than ₹50 lakh and the home loan should not be more than ₹35 lakh. Also, the deduction is available only if the house is bought and the home loan is availed between April 1 2016 and March 31 2017.

So, do not forget to take advantage of the benefits available to a homebuyer while filing your income-tax return this time.