Income Tax Rules: How much tax exemption will home loan holders get, know the income tax rules..
The government encourages people to buy houses. This is the reason why a lot of tax exemptions are available on taking home loans. This reduces the tax liability of the person buying the house. Due to tax exemption, taking a home loan becomes beneficial in two ways. First, your dream of owning your own home comes true. Second, the tax liability of the individual is reduced. The question is how much total tax benefit is available on home loan interest. Let us try to find the answer to this question.
What is the rule of income tax?
There is a provision for a deduction on home loan interest under Section 24B of the Income Tax Act, of 1961. It says that if you take a home loan to buy or construct a house, you can claim a deduction on its interest payment. A maximum deduction of up to Rs 2 lakh can be claimed on home loan interest in a financial year. Some conditions are fixed for this. You can claim this deduction only when you have got possession of this house or you have got it constructed.
Conditions for claiming deduction
The second condition to avail of the deduction available under section 24B is that you are using the house yourself or have given it on rent. If you have taken a joint home with your wife or husband, then both of them can claim a deduction of Rs 2 lakh in a financial year. To claim this deduction, you will have to submit the necessary documents to your employer or income tax department.
The deduction is also available on home loan principal
Under the Income Tax Act, there is a provision for a deduction on the principal amount of a home loan. However, this deduction is available under section 80C, which covers about a dozen investment instruments. Therefore, taxpayers who claim deduction on life insurance, PPF, equity scheme of mutual fund, or tuition fees of two children,
There is no scope for them to claim a discount on the home loan principal. But, if a taxpayer does not claim a deduction on investment instruments covered under 80C, then he can take a deduction up to Rs 1.5 lakh annually under 80C on the principal amount of the home loan.
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