The times have changed a lot where a person cannot pay the
full cost of a home as the cost of properties have gone up so high. It used to
be that if you can save money you can get a home but now it is not so. With the
cost of rent also increasing with the owners looking at them as a source of
retirement income many people are thinking it is better to buy a home through
home loans and pay the EMI instead of paying rent which nowadays are almost
equal.
With the added advantage of getting tax benefits for home loans, it has become a viable option for many people where they can have the
advantage of having your own house, not paying rent and have the freedom of an
owned house and also get tax benefits which this article will talk about.
Tax benefits of home
loans
Tax benefits can be availed by a person under section 24 and
80c
Section 24
Any loan EMI will consist of 2 parts one the interest
portion and the second the principle portion. Section 24 is where a person can
claim tax benefits for the interest paid. Till FY 2016-17, loss under the head
house property could be set off against other heads of income without any limit.
Since 2017 the interest paid on the loan has been capped at Rs.2,00,00 for
self-occupied property. While for a rented or leased out property a person can
claim the actual interest paid if it is lower than or equal to Rs.2,00,000.
Section 80c
A person can get tax exemption from the principle paid under
section 80c. The maximum that can be claimed is Rs.1,50,000. Since the interest
amount will be more during the initial phase of the loan repayment, you can
claim other investments like LIC, PPF, Mediclaim etc.
First Time home
buyers
Since 2017 first time home buyers get an additional benefit
of Rs. 50,000 under section 80EE if they meet the following criteria
- This is the 1st house you have purchased· As on the date of sanction of loan no other house is owned by you
- Value
of this house is Rs 50 lakhs or less
- Loan
taken for this house is Rs 35 lakhs or less
Maximizing tax
benefits on home loans
When you take the home loan alone al these benefits will can
be availed but it will not completely cover your losses as the EMI that might
be paid by you might be more than what is allowed. To maximize on the tax benefits,
one can take a joint home loan with spouse, brother/s or parents. You can have
up to 6 co-borrowers. These co-borrowers need to be co-owners also except in
the case of spouses.
This is beneficial because all the co-borrowers can each
claim the tax benefits under section 24 and section 80. Some banks give a lower
interest rate for women co-borrowers with the condition that the women are also
co-owner of the house. This will help in the long run reducing the amount of
interest paid.