Buying a new home this year? This would be a great time to know some of the common tax benefits you could get for your property. From rent saving to property appreciation in the long term and other significant tax benefits, here are three important sections under the Income Tax Act that you could use to save up to Rs.5 lakhs on your residential house property purchase.

Tax benefits under Section 24

Under section 24 of the Income Tax Act, homeowners can claim a deduction of up to 2 lakhs on their home loan interest. The claimable amount is reduced to 1.5 lakhs if you are filing your returns for the last financial year.

The only condition to claim this tax benefit is to have either the owner or any family member be a resident of the house property. If the property has been rented out to tenants, then the owner can get a full interest waiver on the home loan when it is on rent. You may also be interested in learning on Internal Auditing and Management Consultancy in Kerala

Deduction of interest under Section 80EA

Section 80EA of the income tax act explains the provisions for property owners to get a deduction for interest paid on their home loan. This option is available only if you do not own any other house property at the time of sanction of the loan.

There are a few criteria to get tax deductions on home loan interests under 80EA.

• The deduction can only be claimed if the housing loan is taken from a financial institution or a housing finance company.
• The stamp duty value of the property should not exceed 45 lakhs.
• The recipient should not already be claiming deductions under 80EE of the income tax act.
• As mentioned earlier, this should be the taxpayer’s first home purchase.

 

This section under 80EA was introduced to further extend the benefits under section 80EE to foster low-cost housing.

Deduction of taxable income under Section 80C

Quite different from the deductions we saw above, tax deductions under section 80C of the income tax act apply to home loan principal(investments and not interests).

According to 80C, an individual can claim deductions of up to Rs.1.5 lakhs from their gross total income in a given financial year which could, in turn, reduce their net taxable income and other payable taxes. Here are some more criteria to be eligible for tax deductions under 80C:

• The deductions can only be claimed for the investments made in the same financial year.
• The property should not be sold within 5 years of possession.

• Some of the investment instruments that are eligible for the deduction are: Public Provident Fund, Employees’ Provident Fund, National Savings Certificate, ELSS mutual funds, Senior Citizen Savings Scheme, and so on.
• Expenditures that come under this section that are eligible for tax exemption extends from the repayment of principal on home loans to life insurance premiums and children’s school fees.

 

Summing Up

There is a remarkable amount of tax deductions that can be reduced or even be exempt if you know the right tax law. We know it’s difficult to keep up with all the tax laws and the fine print that comes with it. Check out Parpella to learn all about the laws associated with the finance industry and make informed decisions on every investment. Contact your Business and Company Registration Consultant in Kerala today.