A TAX BENEFIT TO OWN A HOME: A DEDUCTIBLE FROM RESIDUAL INCOME IN 2022
Everyone dreams of owning their own home. Indian citizens have traditionally been encouraged by the government to invest in homes. This is why Section 80C allows taxpayers to deduct the interest on a house loan. Additionally, there are numerous tax advantages to financing your home purchase with a mortgage, resulting in a large decrease in your taxable income.
By focusing on lowering costs and increasing accessibility, programmes like the Pradhan Mantri Jan Dhan Yojana are igniting the Indian housing market. We’ll go through all of the tax advantages of a house loan in this article.
PAYMENT OF TAXES AS PRINCIPAL Section 80C of the Code
The principle repayment portion of an EMI can be deducted from taxable income up to a limit of Rs 1.5 lakh each financial year under Income Tax Act section 80(c). This deduction is only available following the completion of the residential house property’s construction. If you sell your property within five years of the end of the financial year in which you took ownership of such property, this benefit will be revoked. ”
Interest paid on home loans can be deducted from taxes under Section 24B.
The interest you pay on your home loan can be deducted under Section 24(b) of the Income Tax Act. If you develop or buy a home for your own use, you can deduct up to Rs. 2 lakh from your gross income each year if the project is completed within five years. A loan for the acquisition or construction of a self-occupied home must also be backed by the property’s equity (i.e. not for repair, renewal, reconstruction). If the construction/acquisition period exceeds the permissible time limit, you can claim interest deductions on house loan interest for purchase, construction, repair, renewal, or reconstruction up to Rs. 30,000 per year. You can claim the entire interest paid on your house loan for acquisition, building, repair, renewal, or reconstruction as a tax deductible while renting out your home; there is no time limit on the property’s completion. According to the Indian Income Tax Act, a person can only deduct up to Rs. 2 lakh from their taxable income under the ‘income from housing property’ heading in any given year. If there is any remaining loss, it can be carried forward for set-off purposes in future years.
TAX EXCLUSION FOR INTEREST PAYED FOR UNDER CONSTRUCTION PROPERTY
If you buy a property that is still being built and make your EMI payments, you can deduct the interest you paid on your mortgage when the building is finished. The pre-construction and post-construction interest can be deducted under the Income Tax Act. From the year of acquisition or construction of the dwelling property, interest on pre-construction loans can be deducted in five equal annual instalments. Under Section 24(b), a taxpayer can deduct 1/5th of any interest paid during the pre-construction period (if any) and 1/5th of any post-construction interest paid (if any) (if any).
JOINT HOUSE LOAN TAX DEDUCTIBLE
When taking out a home loan with a partner, each borrower can deduct up to Rs 2 lakh in interest under Section 24(b) and up to Rs 1.5 lakh in principle repayment under Section 80C if the loan is taken out jointly. If two people apply for a home loan, the amount of deductions possible is doubled. However, both applicants must be co-owners of the property and both service the EMIs in order to be considered for funding.
A SECOND HOME LOAN TAX BENEFIT
If you take out a second mortgage to buy a second house, you can take advantage of the tax advantages outlined above, but the total amount of deductions is limited by the applicable ceilings. In the 2019 Union Budget, the government announced new incentives to encourage people to buy a home. One property was previously treated as self-occupied, and the second was considered to be let out, resulting in the calculation of notional rental revenue and the imposition of that income. A second home can now be deemed a self-occupied property.