Everyone desires to be able to purchase their own home. It has always been a priority for the Government of India to promote homeownership as a means of wealth accumulation for its inhabitants. That is why your mortgage loan interest can be deducted from your taxes under Section 80C. Several tax deductions and credits may be applied toward a home loan’s principal balance.
Housing in India is getting the green light with several government programs, including the Pradhan Mantri Jan Dhan Yojana, which is working to address cost and availability concerns. This post will explain the advantages of tax saving on home loan and the necessary documents required for home loans to avail tax returns.
Tax Deduction for Home Loans, Section 80C
A taxpayer can deduct the principal amount paid on a home loan from their taxable income under Section 80C of the Income Tax Act. The highest amount you may deduct from your taxes using Section 80C is Rs. 1,50,000.
Payment basis eligibility for this Section 80C tax deduction applies regardless of the tax year for which the payment was made. Even if the Assessee hasn’t taken out a loan, the amount paid in Stamp Duty and Registration Fees is still deductible under Section 80C.
Section 24: Income Tax Benefit on Interest on Loan for Purchase/Construction of Real Estate
The interest you pay on your loan can be deducted from your taxable income per Section 24 of the Income Tax Act. Take a loan to fund your home’s acquisition, construction, repair, renewal, or reconstruction. You’ll have to deduct the interest you pay to calculate your taxable income under Section 24.
Section 24 of the Income Tax Act allows homeowners to deduct certain expenses related to their primary residence from their taxable income, up to a maximum of Rs. 2 Lakhs (increased in Budget 2014 from 1.5 Lakhs to Rs. 2 Lakhs).
It’s also worthless that interest paid on a loan is deducted from income tax under Section 24, whether it’s done so on a payable basis or accrual basis. In contrast to Section 80C, which only enables deductions on a pre-payment basis, deductions under Section 24 can be claimed annually regardless of whether or not any payments were made during the year in question.
First-time homebuyers may be eligible for tax breaks on the interest they pay on their mortgage under Section 80EE. Provisional loan approval must occur between April 1, 2013, and March 31, 2014. The maximum loan amount is Rs. 25,000,000. The home’s worth must be less than or equal to Rs.50 lakh. No more than Rs. 50,000 can be deducted under Section 80EE.
Tax breaks of up to Rs.1.5 lakh per year are available to individuals under Section 80EEA of the Income Tax Act. Mortgage interest is eligible for tax breaks. Those benefits exceed the deductions available under Section 80EE.
Previously, people had until March 31, 2021, to submit a claim for benefits. Despite this, the Union Budget 2021 release saw the Finance Minister propose extending the deadline to March 31, 2022.
How to Claim Tax Benefits
If you do not notify your employer timely, you will need to claim the tax savings on the home loan when you file your return. There’s a deductions box in your ITR form. There, you must specify the following:
- Allowable deductions following Section 80C. The taxpayer should record his principal payments on his loan and contributions to his PPF and EPF accounts here. The Section 80C deductions for principal payments will be applied back to your income if you sell the home less than five years after you take possession.
- First-time homebuyers are eligible for a Section 24 deduction, which reduces the loan cost.
- SB interest generated is tax deductible under Section 80TTA.
- Charitable contributions qualify for IRS Code Section 80G tax breaks.
You will have to submit the following documents required for home loan to claim a tax deduction:
- Information about the property’s ownership.
- An official document of the loan indicating the breakdown of interest and principal payments made through instalments.
- A receipt or other official document that indicates when you purchased the house or the building was finished.
- A loan in the taxpayer’s name is required, as is proof that he took out the loan.
- Documentation demonstrating that the required annual municipal taxes have been paid.