What are the tax benefits of taking a home loan?
A. The tax benefits on a home loan, under the Income Tax Act, are two-fold: 1. Principal repaid: Rebate under section 88 (2) of the Income tax Act is available to individuals on repayment of the principal portion as given below Gross total income before deduction Rebate available Up to Rs.1,50,000 20% More than Rs.1,50,000 but not exceeding Rs. 5 lakh 15% More than Rs.5 lakh none Moreover, the rebate is allowed up to the maximum limit of Rs.20,000 per financial year on the repayment of the principal sums, which need not be out of income chargeable to tax of the year in which such repayment is made.
Ans: The income tax authorities look with favour upon those servicing a housing loan from specified financial institutions. And, it is up to you to be wise enough to take advantage of this. Let’s start with Section 24 of the Income Tax Act. Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year. This is now a substantial amount. It started off with the Income Tax Department offering Rs 15,000 as the maximum amount eligible for deduction in the case of self-occupied property. This later got doubled to Rs 30,000. It did not stop there. After getting enhanced to Rs 75,000, it was then taken to a limit of Rs 1 lakh. Presently, the limit stands elevated to Rs 1.5 lakh. So, should you borrow money to acquire, construct, repair, renew or reconst
The tax benefits on a home loan, under the Income Tax Act, are two-fold:A) Principal repaid : Rebate under section 88 (2) of the Income tax Act is available to individuals on repayment of the principal portion as given below Gross total income before deductionRebate available Upto Rs.1,50,00020% More than Rs.1,50,000 but not exceeding Rs. 5 lakh 15% More than Rs.5 lakh none Moreover, the rebate is allowed up to the maximum limit of Rs.20,000 per financial year on the repayment of the principal sums, which need not be out of income chargeable to tax of the year in which such repayment is made. B) Interest repaid: Under section 24 of the Income Tax Act , in case of self-occupied property, deduction is allowed up to Rs.1,50,000 per annum for houses acquired or constructed with capital borrowed after March 31, 1999 as long as the acquisition or construction is completed within 3 years from the end of the year in which such loan is taken.
Deductions/ Tax Benefits Related to House Property Various deductions and incentives are given for Investment in House Property Deductions for Self occupied property – The only entitled deduction is interest, if any payable, on loan taken for the purchase or construction of the house property. The maximum deduction on this account is Rs.30, 000/-; However, for properties acquired or constructed from 1st April 1999 out of borrowed funds, maximum limit is Rs. 1,50,000/- Deductions for let out property – The deductions available for computing House Property Income are: 1. 30% of the net annual value for repair and maintenance and rent collection expenses for the property 2. Interest on money borrowed to build, buy or repair the property; Exemptions on profit on sale of house – The profits on sale of house can be deducted if they are invested in another house or in the bonds of National Bank of Agricultural And Rural Development or of the National Highway authority of India. These exemptio
