home loans and taxes
Buying a house is a dream that most people aim to accomplish. The Indian government has always shown a great inclination to encourage citizens to invest in houses. This is why a home loan is eligible for a tax deduction. Buying a house on a home loan comes with multiple tax benefits that significantly reduce your tax outgo. Here are a few important things you should know about home loans and taxes when buying a house.
- Fixed and floating interest rate: The borrower must consider the type of interest to opt for. One can choose between a fixed-interest home loan and a floating-interest home loan.
- Income tax benefit on a home loan – Under section 80C, borrowers can claim a maximum home loan tax deduction of up to Rs. 1.5 lakh from taxable income on the principal repayment. This may include stamp duty and registration charges as well but it can be claimed only once.
- Section 24: Under this section, the borrower can enjoy maximum deductions of up to Rs. 2 Lakh on the interest amount payable. These deductions apply only on the property whose construction is finished within 5 years.
- Section 80EE: This section offers first-time home buyers an additional Rs. 50,000 on the payable interest every financial year. The home loan amount must not be more than Rs. 35 Lakh and the property’s value must be within Rs. 50 Lakh.
- Documents required for a home loan: You need property documents such as the sales deed, stamped agreement of sale letter, NOC from the housing society or builder, possession certificate and land tax receipt, detailed estimation of the construction cost, occupancy certificate and many more. You also need identity proof and address proof.
- Home loan processing fee: The charge payable by the applicant to the lender once the home loan application has been accepted. You can compare lenders and choose the lowest processing fee home loan to save on cost.
- Maintain a good Credit Information India Limited (CIBL) score: CIBIL score is nothing but a credit score is a three-digit numeric summary of a borrower’s credit history. This shows how well you have managed your finances. You can also make part prepayments whenever possible in lump sum for a reduction on home loan interest.
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