For most Indians, purchasing a home is a significant life milestone. In addition to being a source of pride, owning a home is an investment that can grow in value over time. However, purchasing a home is a costly endeavour, and the majority of people need a home loan to fund it.

With the advent of Non-Banking Financial Companies (NBFCs) in India, home loans are now available at affordable interest rates. Additionally, there is a silver lining in the form of tax exemptions and benefits, making home loans less costly. The government offers many tax incentives that can substantially reduce your tax obligation. In this blog, we will explore some of the tax benefits you can avail yourself of against home loans in India.

Tax Benefits on Interest Paid on a Home Loan

One of the most significant tax benefits you can avail of against home loans in India is on the interest paid on loans. For a self-occupied property, you can deduct up to Rs. 2 lakhs of the interest paid on a housing loan under Section 24 of the Income Tax Act. If the property is let out, there is no upper limit on the amount of interest you can claim as a deduction.

Tax Benefits on Principal Repayment

Section 80C of the Income Tax Act provides a provision for a deduction of up to Rs. 1.5 lakh on the principal repayment of a home loan. This deduction can only be claimed if the loan is taken for the purchase or construction of a residential property. However, if you sell the property before five years from the date of possession, the deduction claimed initially will be added back to your taxable income in the year of sale.

Tax Advantages on Registration Charges and Stamp Duty

Apart from the tax benefits on interest paid and principal repayment, you can also claim a deduction on registration charges and stamp duty paid at the time of the property purchase. Under Section 80C, you can claim a deduction of up to Rs. 1.5 lakh on these charges. However, this deduction can only be claimed in the year of the property purchase.

Tax Benefits on Joint Home Loans

If you have taken a joint home loan with your spouse or any other family member, both of you can claim tax benefits on the home loan interest paid and the principal repayment. The co-borrowers can claim the deductions in proportion to their share in the loan. This means both co-borrowers can claim a deduction of up to Rs. 1.5 lakh each under Section 80C and up to Rs. 2 lakhs each under Section 24.

Tax Benefits on Pre-Construction Interest

If you have taken a home loan for the purchase of an under-construction property, you can claim a deduction on the interest paid during the pre-construction period. Under Section 24, you can claim a deduction of up to Rs. 2 lakhs on the amount of interest paid during the pre-construction period, which is the time before the completion of the construction of the property.

The tax exemptions on house loans make it easier for individuals to own their own homes. Moreover, with these tax benefits available against housing loans in India, you can significantly reduce your tax liability. So, if you intend to buy a home, make sure you are aware of the tax benefits available to you and take full advantage of them.

Non-Banking Financial Companies (NBFCs) have emerged as an important source of credit for individuals looking to purchase a home. The significance of getting a home loan in India from NBFCs is that they offer the best loan options that are both flexible and customized to suit the customer’s needs.

Tax Benefits You Can Avail Against Home loans

Tax Benefits You Can Avail Against Home loans