Income tax benefits and home loans

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Income tax benefits and home loans

Resident Indians are eligible for certain tax benefits on principal and interest components of a home loan under the Income Tax Act, 1961.
Benefits on interest paid
For self occupied properties, interest paid on a housing loan up to Rs 150,000 per year is exempt from tax. However, this is only applicable for a residence constructed within three financial years after the loan is taken and also the loan if taken after April 1, 1999. For let out properties, the entire interest paid is deductible under section 24 of the Income Tax act.
If the house is not occupied due to employment, the house will be considered self occupied. Interest repayment of Rs. 1,50,000 p.a. can get you a tax saving upto about Rs. 50,490 p.a.
Benefits on principal payment
Section 80C of the Income Tax Act allows certain investments and expenditure to be tax-exempt. The total limit under this section is Rs. 100,000 (Rupees One lakh). This includes payments towards principal repayment of housing loans (among other investments). It also any registration fee or stamp duty paid. Repayment of principal amount upto Rs. 1,00,000 p.a. can further reduce your tax liability by about Rs. 33,660 p.a.


Author: Editor

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