A housing loan sure serves as great financial support when looking for a dream house – but it is also a huge responsibility with multiple aspects to consider beforehand. While most borrowers spend a good deal of time researching home loan interest rates, documentation and home loan eligibility, they often tend to overlook housing loan incentives. Read on to know about home loan incentives and the benefits that come along.
5 Things About Home Loan Incentives You Must Know
The housing loan incentives that every borrower must be aware of before opting for home loan. When purchasing a housing loan, make sure you go through the home loan incentives carefully before signing on the dotted line. Get in touch with the lender to clarify any doubts and apply for a loan online without any hassles.
Deductions under ITA Section 80C benefits are reversible
Section 80C of the Income Tax Act offers housing loan tax benefit and allows borrowers a yearly claim of up to INR 1.5 lakh for repayment of the principal amount. This is a substantial sum considering the borrower can claim it every year for the entire tenor. However, one must keep in mind that the deduction is reversible if the house is sold within 5 years of purchasing the loan. The amount then gets added to the borrowers’ taxable income for the year in which it was sold off and is taxed as per the existing rates.
Processing fee for housing loan can be claimed as a deductible
When opting for a housing loan, lenders generally impose a processing fee – the cost of sanctioning and processing the loan. In certain cases, the processing fee can amount to a hefty sum depending on the charges levied. Usually, lenders charge a certain percentage of the loan amount. Some financial institutions and banks may have an upper limit of up to INR 50,000 while others may not extend this benefit to customers. Nevertheless, under Section 2 (28A) of the Income Tax Act, the processing fee charged is considered as an interest payment that can be claimed as a deductible.
Deductions under Section 24B can be claimed on private loans used for purchasing home
Private loans also come with tax deduction benefits provided the terms and conditions of usage are met. As long as the loan amount is used for buying a house or constructing one under 5 years apart from repairing, reconstructing and revamping a house, borrowers can avail of deductions under the Income Tax Act Section 24B. In such a case, the lender must charge a nominal interest rate, provide a valid interest certificate and file the interest earnings at the time of income tax reporting. Borrowers must note that these benefits are only applicable for the payment of interest and cannot be claimed for the payment of principal.
Housing loan tax deductions can be claimed by co-owners and co-borrowers only
A joint home loan is a preferred option for couples since such a loan offers several benefits. One of the many perks is the tax deductions available to customers. However, the deductions are only restricted to co-owners and co-borrowers under the Income Tax Act. Simply being listed as a co-borrower does not have you claim the benefits despite paying a fair share of the EMIs.
Borrowers of joint home loans can claim tax benefits individually
Anyone registered as a co-owner and co-borrower of the property under the Income Tax Act can claim tax benefits individually. In families where both spouses are paying joint home loan EMIs, savings can get doubled effectively owing to this benefit. However, borrowers must note that the combined claims for interest and principal payment cannot exceed the amount repaid in a year.
Having a good understanding of home loan incentives is important to safeguard your savings. Alongside the tax benefits, borrowers must also compare various loans available in the market. Look up reliable and top-rated lending institutions to grab the best.
The best housing loans offer flexible repayment tenors, affordable home loan interest rates and other exclusive add-on features for borrowers who meet the eligibility criteria. If you are planning on availing of a home loan soon, we recommend using a home loan eligibility calculator to understand if you qualify for a loan and what’s the loan value you can get.
Home Loan Eligibility Calculator
The home loan eligibility criteria for incentives can be checked with the help of a calculator below:
|Age limit||23 – 62 years (salaried)
25 – 70 years (self-employed)
|Work experience||3 years (salaried)
5 years (self-employed/business)
|Average salary||INR 25,000 per month|
The housing loan calculator functions as per a mathematical formula to assess the loan amount. It takes the net monthly salary, income, loan tenor, and existing obligations into account. The calculator can be accessed online from the website of the chosen lender. Several online tools are also available for free checking.