New Delhi: Owning a home is a significant milestone, and in India, it comes with considerable tax benefits that can ease your financial burden. Understanding and leveraging these benefits can significantly enhance your financial strategy. Here’s how you can make the most of home loans and related tax advantages.
Understanding Home Loans
A home loan is a financial product provided by banks and financial institutions to help individuals purchase or build a property.
It generally involves borrowing a lump sum amount from the lender and repaying it in monthly installments over a predetermined period, typically with added interest.
The loan amount, interest rate, tenure, and repayment terms vary based on the lender and borrower’s profile. Home loans are often accompanied by tax benefits, which can play a crucial role in reducing the effective cost of borrowing.
Joint home loans
Opting for a joint home loan can provide substantial tax benefits. When a property is jointly owned, both you and your co-applicant (such as a spouse or family member) can separately claim deductions on the home loan.
Under the old tax regime, each co-applicant can benefit from a deduction of up to Rs 2 lakh on the interest paid for a self-occupied property.
Additionally, deductions for the principal repayment can be claimed under Section 80C of the Income Tax Act. This dual benefit not only reduces the tax burden but also makes borrowing more financially manageable.
Claiming both HRA and home loan deductions
If you own a property but live in a rented accommodation, you can take advantage of both House Rent Allowance (HRA) and home loan deductions.
For example, if you own a home in Mumbai but rent a place in Bengaluru for work, you can claim HRA for the rented property while also receiving deductions on the home loan EMI for the Mumbai house.
This strategy ensures maximum tax relief by covering both rental and ownership expenses.
When you own multiple properties
Indian tax laws allow up to 2 properties to be considered as self-occupied. If you own 3 or more properties, you can designate up to 2 as self-occupied, thereby avoiding tax on notional rent for these properties.
Notional rent applies to additional properties, but only 1 will be considered for tax purposes. This provision helps in reducing the tax impact of multiple properties and optimising your real estate investments.
Income Tax saving: Know how to use multiple strategies to maximise tax benefits on home ownership. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
