Home Loan Tax

Use Home Loan Tax Benefit Calculator to Estimate Your Tax Savings as a Homeowner

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Taking a home loan is a big decision. For such decisions, one must be aware of the factors they should consider while taking a home loan. A crucial factor that everyone has to consider while taking a home loan is its interest rate and tenure. Other important factors include credit score requirements, down payments and associated charges. 

One also needs to know about the various tax benefits on home loans and calculate home loan tax benefits according to the loan liability. A home loan tax benefit calculator can help a borrower estimate their tax savings as a homeowner. 

Tax Benefits on Home Loans

Under the Income Tax Act, 1961 there are several tax benefits on home loans. They can get tax deductions and exemptions on both the principal amount and interest rate levied on the home loan.

These tax benefits features are mostly listed in Section 80C and Section 24B. Under Section 80C, a borrower can get a tax deduction of Rs.1.5 lakh on the principal payment. Section 24B allows for tax deductions that can amount to Rs.2 lakh on the interest amount paid.

There are other tax deductions on home loans, as given under Section 80EE under which a borrower can get a deduction of up to Rs.50,000. The Union Budget, 2019 made it further possible for borrowers to claim additional deductions up to Rs.1.5 lakh on interest payments.

When applying for a home loan, one needs to consider several other important factors such as the interest rates, additional costs, eligibility, etc. A loan applicant should research the offers of various financial institutions before applying for one. 

Furthermore, there are several financial institutions which provide pre-approved home loans which makes the loan procedure easier. One can check his/her eligibility for such offers by entering some basic personal information on the respective lender’s website.

Terms and Conditions For Claiming Tax Deductions Under Section 80C

Under Section 80C of the Income Tax Act, a borrower can avail yearly deductions on the principal amount of a home loan, with a limit of Rs.1.5 lakh. One can also claim a deduction on the stamp duty and registration charges of the house under this Act, but only for one year.

For claiming this deduction a borrower needs to fulfil these conditions:

  • The borrower has to avail the home loan for the purpose of construction or purchase of a property only.
  • This deduction is not applicable for under-construction properties. Tax benefits can be claimed only after the construction of the property is complete.
  • For getting this tax benefit, one cannot sell their property within the first five years of possession.
  • Total amount of all deductions can be a maximum of Rs.1.5 lakh in a financial year.

Terms and Conditions For Claiming Tax Benefits Under Section 24B

Under Section 24B of IT Act, one can get a maximum deduction amounting to Rs.2 lakh on the interest paid on a home loan. To get this tax benefit, one needs to fulfil the following conditions:

  • One can avail tax benefits under this section only for the construction and purchase of a property.
  • He/she can claim full Rs.2 lakh deduction only after construction or purchase of property is completed within 5 years.
  • In case construction or purchase of a property takes more than 5 years, an individual can get a maximum of only Rs.30,000 of tax benefit under this Act.
  • However, in case he/she lets out the property, they can claim the whole amount of tax benefit under this Act. This can be done even if the construction of this property is not over.

Terms and Conditions For Claiming Tax Deductions Under Section 80EE

Under Section 80EE, there is an additional provision for tax exemption. Eligible borrowers can get a maximum tax deduction of Rs.50,000 on the home loan interest payments. However, for that, a borrower has to satisfy the following condition:

  • This tax benefit applies only to first-time homebuyers.
  • Principal home loan amount cannot exceed Rs.35 lakh.
  • The property that an individual is purchasing must not have a price exceeding Rs.50 lakh.
  • For claiming deduction under Section 80EE, the date of the sanction of home loan has to be between April 1, 2016, and March 31, 2017.

Tax Benefits Available For Senior Citizens

Senior citizens (above the age of 60 years) and super senior citizens (above the age of 80 years) can get a range of tax benefits on their home loans:

  • Under the Income Tax Act, any Indian citizen above the age of 75 years is exempted from filing tax returns. This is applicable only when the sole source of income is their pension.
  • Under Section 80C senior citizens are eligible for a tax deduction of Rs.2 lakh. However, the loan amount cannot be more than Rs.35 lakh. Additionally, the value of the property must not be more than Rs.50 lakh.
  • Senior citizens can also get tax exemptions of up to Rs.3 lakh under Section 24B of the Income Tax Act.

Tax Benefits on Joint Home Loan Ownership

There are also some tax benefits on joint home loans. In a joint home loan, both the co-applicants can claim full tax benefits as prescribed under Section 80C and Section 24B. Therefore the collective tax exemption will be double the exemption in the case of sole ownership.

Thus, taking a joint home loan can be another way to save taxes on home loans. However, one must ensure that their co-applicants are also co-owners of the property.

Calculation of Home Loan Tax Benefit

The most hassle-free way to calculate home loan tax benefits is to use the home loan tax benefit calculator. It makes the process of calculating the tax benefits on home loans easier, simpler, faster and more accurate. Here is how to use it to know about the tax benefits of home loans:

  • Visit the home loan tax benefit calculator page and enter the year of tax assessment
  • Choose the category from ‘Regular’ or ‘Senior Citizen’.
  • Now enter the gross annual income along with principal and interest paid on home loan for that year in designated fields.
  • Lastly, click on ‘Calculate’ option.
  • The calculator will show income tax liability before loan and after home loan tax benefit deductions, and will also show the tax savings amount.

The tax benefits under Section 80C and Section 24B can help reduce the tax liabilities of a borrower. Taking a joint home loan is a very good option to further reduce a borrower’s tax liabilities. One can also calculate their tax liabilities and tax exemptions on the amount as well as its interest by using a home loan tax benefit calculator.

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