Currently, the government provides different tax benefits to people taking home loans. One of these is the deduction on interest paid on the loan. This deduction is valid till 31 March 2024, but the deadline was extended to 31 March 2022 by the previous budget. The new tax regime will offer even more benefits to homeowners. Among the various home loan deductions, Section 80C allows borrowers to claim tax exemptions on interest. These new deductions will increase the amount of home loan that can be claimed.
This tax benefit on home loan is available on the interest that you paid on the loan, but only up to a maximum amount of Rs 2 Lakh. The deduction for principal repayment is up to Rs 1.50 Lakh. You can claim tax benefit on interest paid for up to 5 years. It is applicable only on the one property that is self-occupied by the borrower. You can also claim the deduction for interest on home loan that is paid in equal installments over five years.
The principal amount of your home loan is also eligible for a tax deduction. This is the loan amount that you took out and received in the form of an unsecured loan. You can pay it back in instalments, or even in lump sum. Either way, the principal repayment percentage can be claimed as a tax deduction. You can claim up to 1.5 lakhs in deductions if you repay the entire principal on your home loan.
You can also claim a tax benefit on home loan if you are a co-owner of the loan. It is important to note that each co-owner can claim only half of the deduction. If you have a joint loan with a spouse, both of you can claim the deduction. If you have a joint loan with your spouse, you can also claim a tax benefit on the interest on your home loan, provided that you are filing your taxes jointly.
The amount of the loan you take out is another important factor. The interest rate and location of your residence determine the amount of tax benefit you can claim. While home loan interest deductions are generally higher, you will also benefit from a higher home loan tax benefit. Using a home loan tax benefit calculator online is a great way to determine your tax deduction. Once you have a number for the loan amount, you can enter your information and see how much your loan is worth in terms of your mortgage repayments.
You can also claim a tax deduction for the amount you pay for stamp duty and registration fee. Interest on home loans can be claimed as a deduction under section 80C of the ITA. You can claim up to two lakhs of tax benefit on home loans in any one financial year if you are a home-owner. However, you cannot claim a deduction for interest paid on a loan that you took out for the entire construction of your home.