All the Home Loan Tax Benefits Under Section 24 You Need to Know in 2022
Everyone dreams to purchase their own home one day. The Indian government has shown a strong interest in motivating Indians. They have urged residents to engage in real estate. The ability to deduct interest paid on a home loan is made possible under Section 80C. And if you finance the purchase of a home with a mortgage, you’ll be eligible for a variety of tax benefits. They are much lower than the amount of tax you pay every term. In this piece, you will get to know all of the tax benefits with home loans under Section 24.
All of the Tax Benefits under Home Loans Under Section 24
- Deduction for the interest that was paid on the mortgage
To buy or build a house, one needs to apply for and receive a mortgage loan. If the loan was taken out to pay for home improvements, then those improvements have to be finished no later than the end of the fifth year after the fiscal year in which the loan was obtained. If you are paying (EMI) on your home loan, the payment will consist of two parts:
- Interest payment
- Principal repayment
Under Section 24, you are allowed to deduct the percentage of the EMI. The deduction is equal to the interest that you paid during the tax year, up to a maximum of Rs 2 lakh. There is no maximum amount that can be claimed in interest for a property that is rented out.
- Deduction for interest that was paid in the pre-construction period
Imagine that you have purchased a home that is still in the process of being built and that you have not yet moved in. However, you are currently paying the EMIs. The earliest point at which you will be able to begin deducting the interest you pay on your mortgage is the point at which construction is finished. The Income Tax Act provides for the possibility of claiming a deduction for such interest. In addition to the deduction that you would normally be able to claim from the income from your house property. It begins in the year that the property is purchased or the construction is finished.
- Repayment of a principal subject to a deduction Under Section 80C
A deduction equal to the amount of the EMI that was paid toward the principal during the year can be claimed. Up to one and a half million rupees (Rs.) is the maximum sum that can be claimed. To be eligible for this deduction, however, the home cannot be sold during the first five years of the taxpayer’s ownership of the property. If you don’t meet either of these conditions, the deduction you claimed earlier will be applied back to your income in the year that the sale occurs.
- Stamp duty and registration fees are eligible for a deduction
Under Section 80C, you can claim a deduction for principal repayment, as well as a deduction for stamp duty and registration fees, as long as you stay within the overall maximum of Rs 1.5 lakh. On the other hand, you can only make a claim for it in the same year that the expenses were paid for.
- Extra reduction allowed under Section 80EE
Buyers of primary residences are eligible for an additional deduction of up to Rs 50,000 under Section 80EE of the Income Tax Act. To qualify for this deduction, you need to satisfy all of the following conditions:
- The amount of the loan that is taken out should not be more than Rs 35 lakh, and the value of the property should not be more than Rs 50 lakh.
- The loan must have been authorized sometime between April 1, 2016, and March 31, 2017, inclusive.
- Also, on the day the loan is approved, the individual in question will be considered a “first-time house owner,” meaning that they will not have previously owned a home.
- Extra deduction available under Section 80 of the EEA
An additional deduction of Rs. 1,50,000 for homebuyers under Section 80 EEA of the Income Tax Act was included in the 2019 Budget to encourage growth in the housing market.
The following must be satisfied to qualify for the deduction criteria:
- The property does not have a stamp value that is greater than or equal to Rs 45 lakh.
- The loan must have been approved sometime between April 1, 2019, and March 31, 2022, inclusive (extended from 31 March 2021)
- It has been established that the individual in question is a first-time home buyer as of the date on which the loan was authorized.
- Deduction for interest paid on a shared mortgage
If the home loan was taken out jointly, each loan holder is eligible to receive a deduction. Deductions up to 2 lakhs of rupees and principal repayments under Section 80C up to 1.5 lakhs of rupees are given.
To be eligible for this deduction, it is necessary for them to also be co-owners of the property that is being used as collateral for the home loan. Therefore, taking out a loan with your family members at the same interest rate will help you qualify for a higher tax benefit.
How to File for Deductions and Benefits on Your Home Loan
It is not difficult to qualify for tax deductions when you purchase a home. The steps that need to be taken to claim your tax deduction are explained here.
- The first thing you need to do is work out how much of a tax reduction you can get.
- Determine whether or not you are listed as a co-borrower on the mortgage or whether or not the house is registered in your name.
- Provide your employer with the interest certificate for your home loan to modify the tax deduction at the source.
- If you have not completed the steps that came before this one, you will be responsible for filing your tax return all by yourself.
- If you are self-employed, this step does not apply to you because you are not needed to submit these documents anywhere. Simply store them safely.
Conclusion
It should be kept in mind that an individual can opt for the old tax regime and claim exemptions under the home loan. Deduction such as HRA and others under sections 80C, 80D, etc. for the current financial year. This is something that should be noted at all times. A further choice available to the individual is to switch to the new tax system. It has a lower overall tax rate but does away with tax exemptions and deductions. For more details, visit the Piramal Finance website and get assured assistance.