Tax Benefits

  • The tax benefits available on home loans bring down the effective cost of borrowing. The repayment of principal for a home loan, for instance, is eligible for a deduction of up to Rs. 5 lakh a year under section 80C. But the icing on the cake is the deduction of the interest paid on the loan Up to Rs. 1.5 lakh a year for self occupied and actual interest paid in case of let out property, is deductible from the taxable income of the borrower under Section 24(b) of the Income Tax Act.
  • The home loan benefits are available if the house is for self – occupation or if it is given out on rent.
  • In some cases, the disbursement, the disbursement of the loan is linked to the stages of construction of the property. The tax treatment is different here. This portion of the interest paid prior to the completion of construction cannot be claimed as deduction in the year in which it is paid. However, the borrower can claim deduction for the interest under section 24(b) in five equal installments after the construction is completed.
  • Co – borrowers can separately claim tax deduction if the house is jointly owned by them. The tax benefit can be availed of in the same proportion as the ownership in the property.
  • Under Section 80C deduction is available on repayment of the loan taken from financial institution.

Disclaimer : Above views and details are informative in nature, based on existing income tax provisions, The user should consult expert before taking any decision in this regard.