It’s a common dream of every person to have a home of his own. To fulfill, this dream people collect capital for a long time, and some people fulfill their dream by taking a home loan from banks.
Home loans are the most convenient way to build up your house by expanding your finances. This is the best time to avail a home loan because there are so many banks in India that have minimized the interest rates on home loans for borrowers.
With the most lucrative interest rate offers, various housing finance companies prove to be reliable platforms for home loans. However, before you opt for a home loan, it is essential for you to be aware of the common home loan tax incentives. Below are some valuable motives for the borrowers of home loans:
- If a person buys a house with a joint property paper, for example, if your spouse is your companion, both can benefit from the deduction. Both the owners can claim the tax deduction of up to Rs.2 lakh.
- For the deduction of tax, one can issue a certificate from the lender. It can be a loan taken from any companion, private lender, or employee. People should keep in mind that only the interest rate is deductible, not the primary loan amount.
- In the case of under-constructed apartments, you can claim the total amount of paid interest rate at the time of the pre-delivery period as a deduction amount. One can do this in an equal amount of 5 installments, starting from the possession date of the apartment under construction. The maximum amount of deductible rate is up to Rs.2 lakh that a borrower can claim; it is for the people who have a salaried or secured source of income. But business owners or self-employed property have an additional deduction of interest rate of Rs.1.5 lakh per year when buying the first house.
- If you are availing of a home loan for second occupied house property, there would be no additional rent on the monthly taxable income. However, this scheme is only applicable up to the purchase of two houses. If you are planning to own the third house, then it will charge more tax which is estimated by the market rent that is expected.
Conditions to get the home loan benefits:
- The tax benefit is only possible when the construction of the property is furnished or you opt for a constructed house.
- You can get these home loan tax benefits every year and save many liquids in your savings account.
- If the property owner sells it within five years, then the claimed benefit would be reversed. That means it would be added to his or her income.
- If you rent your property after buying, you would no longer be eligible to claim the tax benefits of home loans.
- If you rent your residential property and avail of the loan, you can get tax exemptions of home loan benefits against HRA.
The Interest Rate
Some banks have reduced the RPLR or Retail Prime Lending Rates on home loans by 5 points. They have cut down their interest rates up to 6.70 per cent per annum. According to a survey, this will give huge benefits to the new borrowers of home loans as the reduced rates would be applicable on the newer one, not for the existing borrowers. If the RBI minimizes the rate of repo, it will benefit the current borrowers of the home loan because the repo rate is co-related to home loans as these loans are calculated on repo rates and the spread and margins of the bank.
How to Claim Home Loan Tax benefits?
The process of claiming home loan tax benefits is very secure and straightforward. Just follow the steps given below to claim home loan tax benefit:
- In the case of co-applicants, the residential property should be registered in your name.
- Estimate the total tax deduction of your claim.
- To adjust the TDS, pass the home loan interest to the salaried person of your house.
- To follow these steps, one needs to submit their IT returns to the bank.
Summary
Home loans are perfect for people who cannot expand the higher amount of money easily. People meeting the eligibility criteria can avail of this fantastic offer. There are many benefits of home loans for the applicants that can be availed by accurate information about every aspect of home loans. Before applying, don’t forget to research current home loan interest rates.
