Decoding tax benefits on a home loan
Buying property is a great way to save tax and enjoy long-term benefits
Tax payments invariably end up depleting your hard- earned financial reserves. However, there is no escaping this problem.
To ease the tax burden, the government provides breathers at regular intervals in the form of rebates. An effective tool for saving tax is a home loan. By purchasing a house, you not only become eligible for tax deductions but also become the proud owner of a house.
The sole aim of the government in providing lucrative tax breaks on home loan is to encourage people to purchase properties. By doing so, it keeps the housing segment booming, the ripple effect of which is seen on other sectors as well.
Home loans are a great way to save tax and enjoy long-term relief. The Income Tax Act of 1961 states that loans can be used as tax-saving instruments too. After procuring a home loan for purchasing a property, a person can claim tax deductions on the principal amount as well as on the interest that he would be paying towards servicing the loan.
Tax benefits on home loans are available under the Income Tax Act Sections 24, 80C and 80EE. Only individuals and HUFs (Hindu Undivided Families) are eligible for the benefits. These tax benefits are available only on home loans and not on nonhome loans such as loan against
property (LAP) etc.
Tax benefits on loans
Purchasing a home is never easy. One has to give a fat chunk of money as down payment and for the balance amount, a loan can be availed. This loan entails relatively higher interest rates. However, it has a distinct advantage as your home loan helps you save taxes year after year as it has a long tenure.
Tax benefits are available on two components of a home loan – the principal amount and the interest. While the benefit on principal repayment can be availed under Section 80C, the same can be claimed on the interest repayment under Section 24. The UPA government had introduced Section 80EE in the budget 2013-14 offering additional tax benefits on interest repayment, with certain conditions. Firsttime buyers, who took a home loan in the financial year 2013-14, became eligible for additional tax benefit on ₹ 1 lakh for interest payment over and above the tax deduction available under Section 24. For unutilised interest, the deduction was available for the financial year 2014-15 as well. This additional tax saving meant that people had the bandwidth to save more money. But the government did not extend it in the following years and this year too there was no mention of Section 80EE.
For the financial year 2015-16, the benefits are available just on Section 80C and Section 24.
Section 80C deals with repayment of principal amount and stamp duty/ registration charges. The amount that is repaid by the borrower towards the principal component of the home loan is allowed as tax deduction under Section 80C of the Income Tax Act. One can avail maximum tax deduction to the tune of ₹ 1.5 lakh under this section. This limit of ₹ 1.5 lakh is towards the total amount paid collectively for PPF, tax saving FDs, equity oriented mutual funds, National Savings Certificates, among others.
The section does not allow the benefit during the years when the property is being constructed. One can avail the tax deduction only after completion certificate has been given. However, it should be noted that a taxpayer can aggregate the interest that has been paid during construction of the property and claim the deduction in five equal installments in the five consecutive financial years, beginning with the year during which the construction is completed.
However, if the owner sells the property on which he has sought the tax benefit within the five years from the date of obtaining the possession, then no tax deduction is allowed. If the assessee has availed tax benefits during this period, then it is treated as income and is liable for tax payment. the country, the remaining furniture was given to the Indian Military Academy (IMA). Some was given to DDA staff at 25% of the cost as per the decision of the authority. What’s been kept outside is the furniture taken out of the flats and found to be unserviceable. The cost of this furniture is not more than ₹ 1 crore. An online notice for auctioning this will be sent out next week and hopefully it will be cleared soon,” the official says.
But why the wastage? Why not put it to good use and give it to someone who really needs furniture?
“A decision was taken that the furniture had been purchased only for the purpose of the Games and so was not durable to be used for high-end apartments such as those within the complex. Meanwhile, a request was received from SAI and IMA. Despite several auction notices, no kabadiwallas came forward to buy the pieces, so we will be sending out a fresh notice next week and see what happens,” the official said.
A decision has already been taken to convert the patch into a park.
“This is a 5.5 hectare green patch that will be developed into a park. This has already been sent for financing sanction,” say officials.