A property purchase is a great idea to improve your financial standing. It’s likely to be one of the biggest transactions of your life. No doubt, you will need a big home loan to fund your purchase. You don’t need to view borrowing with trepidation. In fact, this looks like one of the best times to explore the housing market. The home loan rates have taken a plunge. Property prices have been more or less stagnant over the last couple of years. The builders are seeking to do away with the inventory. And above all, the government has come up with several incentives to democratise housing by reducing the burden on home loan borrowers. While you will try your best to zero in on a property that comes at the best possible price and pick a low-cost loan, you can assure yourself good tax savings and incentives for first-time home buyers, which would sweeten the purchase. Let’s take a look at these benefits and incentives.
Deduction On Principal Repayment:
Payments made towards the principal component of your loan is eligible for deduction under Section 80C. The maximum amount claimable is Rs 1.5 lakh. However, if the property is sold within five years since the financial year in which you took possession, the entire dedu-ction that you claimed will have to be paid in the year of sale.
Deduction For Interest Paid:
The interest you pay towards your loan can be claimed under Section 24B. While the maximum limit is Rs 2 lakh for a self-occupied property, there is no upper limit for claiming interest for a let out property. Unlike the principal component of the EMI, the deduction on interest is calculated on accrual basis. This means that even if the borrower misses out on making EMI payments in few of the months, he would still be eligible to claim deductions for the interest part of the EMI for the entire financial year. You can also claim deduction on the interest paid during the pre-construction period after getting possession of the property. This deduction can be claimed in equal installments over a period of five years from the year of possession.
Deduction On Processing Fees:
Charges related to the services provided by the bank on home loan is eligible for deduction under Section 24. The processing fee counts as a charge related to the home loan and is thus eligible.
Deduction On Stamp Duty And Registration Fees:
Payments made towards stamp duty and registration fees are eligible for deduction under Section 80C (2) (xviii) (d) of the Income-Tax Act.
Loans From Friends And Family Are Deductible:
Interest paid towards repaying a loan taken from family or friend is also deductible under Section 24 provided the loan has been taken for building a house or reconstruction. However, the lender must file an income-tax return repor-ting the interest income and the tax paid on it.
Additional Benefits:
The Pradhan Mantri Awas Yojna provides subsidies on home loan interest rates for properties bought until March 31, 2019, based on income, loan amount and property size. These are not tax benefits but an effective lowering of the interest rate, which can help you save lakhs of rupees in the long run.
(The writer is CEO of BankBazaar.com)
