I have recently bought a home on a home loan, I want to know what tax benefits are available for a salaried employee when taking a home loan. What documents do they need to keep handy?
Pankaj Gadgil, MD&CEO, Aditya Birla Housing Finance says taking a home loan can provide significant tax savings. Also, the tax benefit is available to taxpayers who opt for the old tax regime. The maximum tax deductions for a housing loan, as per different sections of the Income Tax Act, are detailed below.
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• Interest on Home Loan (Section 24(b)): Borrowers can deduct up to Rs 2 lakh per year from their taxable income for interest paid on a home loan. This deduction is applicable if the construction of the house is completed within five years of availing of the loan and the property is either self-occupied or rented out.
• Principal Repayment of Home Loan (Section 80C): Borrowers can claim a deduction of up to Rs 1.5 lakhs per year for the principal amount repaid on a home loan. This deduction falls under the overall Section 80C limit, which includes other investments and expenses such as PPF and EPF.
• For joint home loans taken with a spouse or co-owner, both parties can claim separate deductions for interest and principal repayment, up to the mentioned limits. These benefits apply only under the old tax regime when filing Income Tax Returns (ITR). The new tax regime, introduced in the 2023 budget, does not include these deductions.
• It is essential to obtain a Home Loan Interest Certificate from the lender. This certificate should be shared with the employer for TDS adjustments or filed under the deduction section in the ITR.
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