Most people build their dream house by taking a home loan to meet their money needs. And, why not opt for it when you also get tax benefits on a housing loan. Yes, you heard that right! Let’s understand home loan tax saving options and see how you can save big using a home loan tax savings calculator.
Tax saving benefits on home loan
There are different ways in which you can save tax on your home loan. They are:
- Deduction on principal repayment
As per section 80C of the Income Tax Act 1961, you can claim a tax deduction on your taxable income of up to Rs 1.5 lakh on the principal repayment of your housing loan. This deduction can include stamp duty and registration charges. However, do keep in mind that this deduction can be claimed only once.
- Deduction on interest repayment
For interest repayment, you can claim a tax deduction of up to Rs 2 lakh on your taxable income as per Section 24(b) of the Income Tax Act, 1961. Rs 2 lakh is the maximum limit for a self-occupied house. If you avail a housing loan to rent out the house property, there is no such upper limit to claim deduction on interest repayment. However, there is a provision to this deduction that you should know. The construction of the house property should complete in 5 years to claim this deduction from your taxable income, else, the deduction would be added to your taxable income in the subsequent assessment years.
- Deduction for first time housing loan borrowers
Did you know that you could enjoy additional tax benefits if you are a first time home loan borrower? You claim an additional amount of Rs 50,000 on interest payment under Section 80EE, if the loan amount is more than 35 lakhs. But make sure that your property value is within 50 lakhs in order to claim this deduction.
How to use a tax saving calculator?
While using a home loan tax saving calculator provide details regarding the home loan, the tenure in which the loan is being repaid, as well as the interest rate of the loan. After the details are filled, the calculator will show results about the tax amount to be paid after deductions, the tax amount you would have to pay without the home loan tax benefits, as well as the total amount you are saving after the tax deductions. Finding out the tax deductions on the loan becomes simple and effective through the usage of a tax saving calculator.
Making the most out of your home loan is important especially when it comes to learning the tax benefits associated with it to make the most of it. If you too are planning to build your dream home, apply for home loan today and make sure, you use tools such as a home loan tax saving calculator to learn everything that you need to know.