Tax Benefits on Home Loan

It is a known fact that buying a home is an expensive proposition. In the purview of the rising prices of the real estate properties, it would require huge amount of investment. In such condition, several people find it difficult to afford buying a home without applying for a home loan. It is a credit facility that comes with a cheaper rate of interest and longer repayment duration. Besides, it comes with tax benefits that make it even more attractive proposition for loan applicants. There is various tax benefits associated with home loans under different sections of the Indian Income Tax Act, the tax allowances are discussed below:

- HRA (Home Rent Allowance)

Majority of the salaried employees are entitled to get housing rent allowance under section 10 (13A) of the Income-tax Act. The tax benefit is applicable as part of the compensation structure. You can claim the HRA for living in a rented home until the construction of the property is completed and is ready to be occupied.  Once the property is ready to be occupied, HRA would be stopped immediately. 

- Tax exemption on Interest payment

Under section 24 of the Indian Income Tax Act every person who has availed home loan is liable to get tax exemption on the interest component of their loan. The tax exemption is also applicable for purchase, construction, re-construction and repair of the property. This implies that you can claim the allowance on the interest payment each month as well as on the other aforementioned costs that are incurred in a financial year. The maximum deduction you can get under section 24 on the self occupied property is Rs. 1.5 Lakhs in a financial year. 

- Repayment of principal amount

People who have availed home loan from any HFC (Housing Finance Company) are eligible to get tax deduction on repayment of principal amount. The deduction is applicable under section 80 C and the maximum amount of tax rebate you can get is Rs. 1 Lakh in a financial year. You must know that the deduction under this section is clubbed with insurance premiums, school fees, NSC (national saving certificate), EPF (employee provident fund). While claiming the tax benefit it is important to know that the deductions are valid only on self-occupied properties and not on rented properties. 

If you have applied home loans with Indiabulls Housing Finance Ltd, our executives would provide you full assistance on tax benefits.