Wednesday, January 26, 2022
HomeFinanceStep by step guide to claim additional tax deduction benefits on home...

Step by step guide to claim additional tax deduction benefits on home loans

Owning a house is a dream of many but the expenses it brings can be a bit out of the budget for some. Hence, to provide some relief to the taxpayers, the government of India has introduced several provisions under Section 80EEA of the Income Tax Act. A taxpayer can easily avail benefits from these provisions and save a hefty sum every year. However, to reap out the maximum benefits from all the relevant tax laws, it is extremely important to know several things. Besides, if you are planning to buy a house, make sure you know all the steps perfectly to enjoy the benefits without any worry. In this article, we will discuss which tax provisions offer your tax deduction benefits and how to avail the same.

Knowing all relevant tax provisions is the key to claiming maximum benefits while buying a house.

Income Tax Provisions that Offer Tax Saving Benefits

There are 4 steps by which you can claim interest deduction paid on your home loan. Now you can claim a tax deduction of up to Rs 3.5 lakh from your annual taxable income. 

  • All starts with Section 24(b) of the Income Tax Act that allows a claim deduction of up to Rs 2 lakh. You are eligible for this benefit if your home loan has been sanctioned for the purchase or construction of the property after 1st April 1999. 
  • Now, the government introduced Section 80EE by Finance Act 2016 that allows you a maximum claim deduction of up to Rs 50,000. You have to be a first-time buyer and the house property’s price is Rs 50 lakh and the sanctioned loan amount should not exceed Rs 50 lakh and Rs 35 lakh respectively. 
  • This benefit was further extended by the introduction of Section 80EEA by the Finance Act 2019. This provision is mainly to provide benefits for less expensive housings. In this case, too, you will have to be a first-time house property buyer and the value of the property should not exceed Rs 45 lakh. Under section 80EEA, you can claim a deduction of up to Rs 1.5 lakh in addition to the tax deduction benefits already offered by Section 24(b). Combining the deduction under sections 80EEA and 24(b), the benefits can be up to Rs 3.5 lakh. 

Guide to Claim Interest Deductions 

Now that you are well aware of the perks provided under different sections of Tax Laws, it is important to know the proper steps that need to be followed to avail the benefits.

Since the maximum tax can be saved from Section 80EEA, we will keep our focus on the same.

  • A loan taken from any unauthorized lender will not be eligible for claiming deductions under section 80EEA.
  • The stamp duty of the house property that you are going to buy must be equal to or less than Rs 45 lakh. Property bought over the mentioned value limit will not be eligible for claiming benefits under Section 80EEA.
  • The individual taxpayer cannot claim tax deduction under section 80EE since it was only for FY 2013-14 and FY 2014-15.
  • Only individuals who do not own any house property at the time when the home loan is sanctioned are eligible to claim deductions under Section 80EEA.
  • If you are living in a metropolitan city, make sure the carpet area for the house is less than 60 sqm. Whereas, for any other city, the limit for the carpet area of the house is 90 sqm.
  • The purchase or construction of the house property must be completed within 5 years from the year in which the loan is taken.
  • Make sure that the housing loan taken to buy the house property is from a financial institution or an NBFC.
  • Moreover, the taxpayer can also claim tax deduction benefits under Section 80C, provided that the bought house property is not sold within 5 years of possession.
  • The best part is that if the home loan is taken jointly (eg. husband and wife), both of them are eligible to claim deductions separately under Section 80EEA. Combining Section 24(b), 80C, and 80EEA, along with the fact that husband and wife can claim tax deductions separately, the total savings can be up to Rs 10 lakh in total.
  • It should also be noted that only residential properties are eligible for claim deduction under Section 80EEA. Hence, the owner of any commercial property like the company’s office building, commercial stores, etc. cannot claim benefits under this.
  • The law does not specify anything for the applicant to be a resident of India, hence, NRIs can also claim the same amount of tax deductions.

So this is a brief guide to know the proper way to claim additional tax deduction benefits on home loans. Getting proper knowledge is always a preliminary step before buying a house or availing a loan for the same. There are ways by which you can save a decent amount of money, you just need to know the steps correctly.

Most Popular