Possessing a home of their own is every common man’s dream. The only problem was, the financial channels were very limited and inaccessible. Thus, the dream never got the opportunity to even get close to reality. However, the recent additions like the MCLR lending system, the RERA list and few tax policies have made it possible and feasible for every prospects buyer to pursue their life-long dream and turn it into reality.
Deduction for Interest Paid Towards a Home Loan
A financial loan has two component: the principal component and the interest component. Under section 24, you can reclaim up to Rs 2 lakh on the interest component of the Home Loan in the given financial year. This is, if you have paid more than Rs 2 lakh as interest towards the Home Loan, you can claim a deduction of up to Rs 2 lakh by applying for tax-reclaim.
Deductions for First-time Buyers
Introduced for effective FY 2013-2014, the limit was Rs 1 lakh for up to financial years. The same was reintroduced for effective FY 2016-17 (the assessment year 2017-18) and the limit was changed to Rs 50,000 for subsequent years until the loan is completely repaid.
The added benefit of section 80EE is, if you successfully meet the criteria’s of both section 80EE and section 24, you can claim up to Rs 2.5 lakh on the interest component of your Home Loan.
Deductions for Joint Home Buyers
If a home has been purchased jointly, both applicants can reclaim tax benefit of up to Rs 2 lakh on the interest component.
Home Loan Balance Transfer
The end goal of using the aforementioned policies is to make Home Loan cheaper by retracting the money paid as interest. Referring to the end goal, Home Loan balance transfer can be one way to save a significant amount of your income from being used to pay the interest. Switching lenders lowers the interest rate and thus reducing the overall financial liabilities on you.
Bottom Line: Whether you’re planning to buy a home, or already have one- if you’re eligible for the deduction, you can claim it by duly filling the tax-reclaim application form.