Owning your first house through home loan offers you great tax benefits. These benefits not only refers to your tax deductions but also help you in managing better cash flow.
The following the deductions you will be able to claim when you take a home loan:
Deduction on Interest:
If you are repaying EMI’s of the home loan you took to buy your dream home, the interest from the EMI can be claimed as the deduction. To claim this tax benefits you must be the Owner as well as co-borrower. You can claim this deduction in the starting of the year when construction was complete.
For instance, your house construction will complete on August 30, 2018, you can claim the deduction of interest for the whole 12 months in 2019-20. Every year you can claim a maximum of 2,00,000 for the house you are residing. In case your house is rented you can claim the whole interest as a deduction.
Deduction on principal repayment:
The basic of the EMI which goes towards the principal is eligible to claim under Section 80C of the Income tax act. You can add the outgo for the headed for principal and claim it. You can claim a maximum of up to 1.5 lakh under section 80C.
Deduction on registration charges and stamp duty:
Along with the deduction claimed on the principal repayment, you can also claim the amount you spent towards stamp duty and registration under the section 80C. These can only be claimed in the same year they were paid.
Deduction on pre-construction interest:
While the deduction on interest can be claimed in the initial financial year when the construction was completed, you will also have an option of claiming the pre-construction interest from the same year. In this, you just have to sum up the whole pre-construction interest and claim it in 5 equal installments. After all, thee whole deductions cannot be more than 2Lakh if the house is used for your own residence.
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