Homeownership is a dream for many individuals in India, and a home loan can make it a reality. However, in addition to the benefits of owning a home, the interest paid on a home loan can also be claimed as a tax deduction, providing an added benefit of tax savings. In this blog post, we will discuss how to save tax using home loan interest in India.
Under Section 24 of the Income Tax Act, the interest paid on a home loan can be claimed as a tax deduction. The current limit for tax-free home loan interest is Rs 2 lakh for a self-occupied property and Rs 2 lakh for a let-out property. This means that if an individual pays an interest of Rs 2 lakh or less on a home loan, the entire amount can be claimed as a tax deduction, effectively reducing the taxable income.
To claim the tax deduction, the individual must be the owner of the property for which the loan has been taken. Additionally, the property must be used for the purpose of residence or for the purpose of letting out. In case of a let-out property, the actual annual value of the property must be lower than the standard rent or Municipal value whichever is higher to be eligible for the tax deduction
It’s important to note that the tax benefits on home loan interest can only be claimed if the construction of the property is completed within five years from the end of the financial year in which the loan was taken. Also, tax benefits on home loan interest is not available for a second home or if the property is not occupied by the owner.
In addition to the tax benefits, a home loan also helps individuals achieve their goal of homeownership, which is a significant financial milestone. The ability to claim the tax benefits on home loan interest can also make it more affordable for individuals to purchase a home.
In conclusion, home loan interest is an effective way to save tax in India. By claiming the interest paid on a home loan as a tax deduction under Section 24, individuals can reduce their taxable income and lower their overall tax liability. However, it’s always recommended to consult with a financial advisor to identify the best home loan option and tax saving strategy that suits your individual financial situation and goals. And also, one should be mindful of the overall financial goal, home loan repayment plan and tax saving plan should be in sync with each other to make the most of tax benefits.Regenerate response