Tax Benefits of Buying a Home in India

Posted In | Finance | Accounting Software | India Accounting Tax

Homeownership is a significant financial decision that brings along certain financial benefits, especially in India. One of these benefits includes substantial tax savings. This article will delve into the tax benefits of buying a home in India.

 

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1. Deduction on Home Loan Interest Rates

Under Section 24(b) of the Income Tax Act, homeowners can claim a deduction of up to INR 2 lakh on their home loan interest if the owner or his/her family resides in the house property. However, if the property is let out, there is no upper limit.

 

2. Deduction on Principal Repayment

The portion of your EMI which goes towards the principal is eligible for a deduction under Section 80C of the Income Tax Act. The maximum amount that can be claimed is up to INR 1.5 lakh.

 

3. Deduction for First-Time Home Buyers

Under Section 80EE, first-time home buyers in India can claim an additional deduction of INR 50,000 per financial year. This is over and above the deductions of INR 2 lakh on home loan interest payment and INR 1.5 lakh on principal repayment.

 

4. Deduction on Stamp Duty and Registration Charges

Under Section 80C, the stamp duty and registration charges are also deductible. However, this deduction is allowed only in the year of purchase of the property.

 

5. Deduction on Joint Home Loan

If the home loan is taken jointly, then each of the loan holders can claim a deduction for home loan interest up to INR 2 lakh and principal repayment u/s 80C up to INR 1.5 lakh.

 

6. Deduction for Let-Out Property

Under the new tax laws, the loss from house property which can be reduced from other income is capped at INR 2 Lakh. This can be beneficial if you have a let-out property.

 

7. Capital Gains Exemption

If you sell a property after holding it for more than two years, the gain from the transaction is eligible for a long-term capital gains tax. However, this tax can be saved if the proceeds are invested in another property, as per Section 54 of the Income Tax Act.

 

In order to reap the maximum benefits, it is advisable to understand the tax laws thoroughly or consult with a tax advisor. The tax benefits can be a great help in reducing the financial burden of a home loan.