Zeroed in on the apartment or villa you want to buy? A home loan comes right after. And even if you have enough savings stashed in to perhaps buy a home outright, you really shouldn't. A home loan today comes at 9.5% rate of interest. Inflation measured through consumer price index is at around 6%. Now add all the tax benefits which this copy is all about and what you really pay as real interest to the home loan company is about 1-2%. So take your savings, put them in a good mutual fund, and make a beeline for a home loan.
Here are the 4 tax benefits that make the math of taking a home loan so compelling
1) Section 24 of Income Tax Act: Homeowners can claim deduction of up to Rs.2 lakhs on the interest they pay annually on their home loan. There are 3 conditions which need to be met
a) The loan must have been taken either for purchase or construction of a new property.
b) The loan must have been taken on or after 1 April, 1999, and
c) The purchase or construction must be completed within 3 years from the end of the financial year in which the loan was taken.
What happens if the property is not ready in 3 years, which is more common than rare in India! In this scenario, the aggregated interest will be allowed deduction in five successive financial years, starting from the year in which the acquisition/construction was completed.
This benefit is available to everyone, whether you live in the house or don't. But if the property is rented out, there's an additional benefit. Your entire interest on the home loan becomes deductible giving you a huge tax edge.
2) Then come section 80C of the Income Tax Act: You can deduct the principal amount if the apartment or house if self-occupied. Total deduction with a ceiling of Rs 1.5 lakh is allowed for such payments under the overall limit available under Section 8OC. Stamp duty, registration charges and other expenses related directly to the transfer are also deductible under this section, subject to a maximum deduction amount of Rs.1,50,000. You should claim these expenses in the same year you buy property in.
The law does make an exemption and allows deduction in case your city of employment is different from where you have bought the property in,
3) Also know about the Section 80EEE of Income Tax Act: This deduction has been recently added and is available only for first time homebuyers provided
a) The cost of property does not exceed Rs 50 lakh while maximum home loan is Rs 35 lakhs
b) Home loan must be sanctioned between April'16 to March'17
c) No other property should be owned by the tax payer on the date loan is sanctioned
This deduction is made be available from Financial Year 2016-17 onwards.
Both resident and NRIs are eligible to claim this benefit.
4) And the best part: If you buy the property along with your partner, spouse, or parent, joint owners who are also co-borrowers can claim the above benefits separately. Hence, double the benefit. But the important point to note is that you may have jointly taken the loan but if you are not a co-owner in the property, then you cannot claim these tax benefits.
Wrong sentence:This benefit is available to everyone, whether you live in the house or don't. But if the property is rented out, there's an additional benefit. Your entire interest on the home loan becomes deductible giving you a huge tax edge.
Incorrect information. Check last statement of point 1)"Your entire interest on the home loan becomes deductible giving you a huge tax edge." There have been recent amendments capping this amount to 2 lakhs only.
What about property under construction? all these benefits does not stand valid until you have property under posession!!!
According to me, In the current scenario going in for a home loan is a bad choice for most of the people. Even if you go in for a home loan kindly please make sure you dont add any co-applicant in your loan for sure. Since it reduces the borrowing eligibility for both of them as the entire EMI is treated as your liability unless it is really necessary to go in for a joint loan. Also banks have a very bad practice of asking for a co-applicant by saying it is mandatory make sure you dont do so. Currently your interest claim is capped at 2 lakhs per year, hence going in for a home loan does not make much of sense. According to my approximation if your interest rate is 8.5% or so in a 20 years loan you almost end up paying double the amount you have borrowed imagine how much you would end up paying for a 30 year loan. in any home loan your capital will start reducing only after 7 years of EMI repayment. So anytime if you plan to preclose your loan. you will end up paying more.Hence going in for home loan to save on tax is a bad idea. you prevent tax and end up paying banks. The indian government earlier made all banks as nationalised banks to server the public. Now it is the opposite there is no banks in india is trying to serve the people.If you have saved enough for buying a house use that money instead of going in for a loan, unless you are sure that the property will appreciate more than 100% in a span of 5 years.
What a piece of crap you are writing and then even negating your points by saying" unless you are sure that the property will appreciate more than 100% in a span of 5 years. " Prices of property in india double like anything and they way we are expanding and destroying are agricultural alnd there will be appreciation of property all the more and taking a loan of 25 lakhs for 30 years doesnt mean you have to pay for thirty years you idiot you can pay off as soon as you want and any property bought 5 years back for 15 lakh is nearly worth 30-35 lakhs in cureent scenarion so who is at loss tell me?
Title of the article is misleading. When you take any loan, you pay it back in interest which if the duration is longer then can be as much as double the principle amount. The saving money part is not logical if you pay substencial amount of interest. All you get to save is few thousand bucks per year which depends on your tax slab.