The government has tried to bring certain reforms that make home loans easier to avail and enjoy. Since tax is mandatory to pay and home loans involve a significant amount of taxes due to such high cost of real estate, the government has introduced many benefits and subsidies on tax. These rebates help to enable home loans for tax deductions under various sections of the Income Tax Act (1961). There are special benefits for women applicants and defense personnel.
The government is inclined towards more people buying real estate and opting for home loans. By offering tax deductions, special schemes for marginalized sections, and multiple benefits for non-salaried people, they help the citizens to fulfill their goals of living in their own house. When you take a home loan , there are multiple tax benefits associated with it. The benefits can be on the home loan interest rate, the loan amount, stamp duty, or additional deductions for homebuyers.
Many banks like Canara Bank offer home loans at low-interest rates. The loan amount can go up to Rs. 3.5 crores depending on the borrower's financial strength and credit score. There are various interest subsidies like Pradhan Mantri Awas Yojna (PMAY) that provide lower interest rates to eligible customers. The candidates for the PMAY scheme can get additional tax subsidies of up to Rs. 2.67 Lakh on the interest rate. If the borrower has a co-applicant for the loan, the eligibility criteria increases, and the interest rate is also reduced to benefit both applicants.
Section 80C: The tax benefits are availed on the principal loan amount. These deductions are permitted only on the houses after the construction is complete. The borrowers have to provide a completion certificate to the lender to avail themselves of this deduction. The maximum deduction can be up to Rs. 1.5 Lakh. The deduction is not provided while the construction is going on. When the applicant is availing of this subsidy, the property cannot be transferred or sold. There is a minimum period of five years from which the house was possessed by the borrower.
Section 80EE: The value of the house/property should be less than Rs. 50 Lakh. The LTV ratio also is considered, and the maximum loan amount should be Rs. 35 Lakh or less. This deduction applies only to the interest rate that is paid each year. The maximum tax rebate is Rs. 2 Lakh per year. The house can be purchased or constructed, as there is no restriction on its status.
Section 24(b) : This tax deduction is applied on both the interest rate and loan amount, i.e., the whole amount paid under the home loan. For self-occupied property, the maximum amount is Rs. 2 Lakh, while for Non-self-occupied property, there is no upper cap. The purpose of the loan can be for anything like purchase, construction, repair, renewal, or reconstruction of a real estate property. The person is eligible for this tax benefit if the purchase/construction of the house is completed within 5 years of taking the loan. The tax deduction takes place on an accrual basis.
There are special rebates for joint home loans. The two applicants can take the home loan together while enjoying tax benefits on interest rate and principal loan amount separately. If the person is eligible for tax benefits of Rs. 2 Lakh (interest rate) plus Rs. 1.5 Lakh (Principal amount), the same benefits can be enjoyed by the other applicants as well. The eligibility criteria also enhance for joint home loans.
Conclusion
Applicants can also avail themselves of tax deductions on a second home loan. Although the deduction does not apply to the loan amount for the second home loan, there are the same benefits as in interest rate for single home loans. To avail yourself of all tax benefits, ensure that the income tax return is filed completely on time.
Also read this: A Justification For Taking Out A Home Loan