The current union Budget has extended the tax benefits for residential property purchase for another year. Now, you can save significant part of tax liability if taking a home loan. The savings on tax payment as a result of the new budget declaration are significant.
Here's how the tax incentives work when taking a home loan: Interest paid on the home loan As per Sec 24(b) of the Income Tax Act of India, 1961, you can obtain a deduction up to Rs. 150,000 towards the total payable interest on the home loan taken for purchase, construction of house property, repairs, renewal or reconstruction of house property. (The deduction stands reduced to Rs 30,000 in case of loans taken prior to March 1, 1999). The interest payable for the pre-acquisition or pre-construction period would be deductible in five equal annual installments commencing from the year in which the house has been purchased, acquired or constructed. In case of self-occupied property, this tax deduction is allowed only for one such self-occupied property. Principal repayment of the home loan | As per the newly introduced Sections 80C with section 80CCE of the Income Tax Act of India, 1961, the principal repayment up to Rs. 1,00,000 on the home loan will be allowed as a deduction from the gross total income of the tax payer subject to fulfillment of prescribed conditions. | Let us consider a hypothetical illustration. Net taxable Income: Rs 5,50,000 Principal repayment on home loan for the same year: Rs 1,10,000 and Interest payable for the same year : Rs 1,60,000 Maximum Deductions allowed: Rs 2,50,000 (Rs 1,50,000 towards interest payable & Rs 1,00,000 for principal repayment of the loan amount) Thus, total taxable income of the taxpayer will reduce to Rs 3,00,000 ( Rs 5,50,000 - Rs 2,50,000). |
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