If you are a homeowner or a prospective buyer, under the Income Tax Act of 1961, there are a few Home Loan Benefits available to you. For instance, if you are constructing a house, you can avail a deduction of up to Rs. 2,00,000, which has to be completed within three years of since the loan has been availed. If the house is not self occupied, then you can claim full deduction on the interest paid.
In its pre-budget memoranda for Budget 2017, FICCI (Federation of Indian Chambers of Commerce and Industry) has insisted the raising of Home Loan Deductions limit to the extent of Rs. 3,00,000. This allows you to save a lot of money that would otherwise be paid as tax.
Post the demonetisation move of 2016, a lot has changed for taxpayers and people wanting a loan. A change in the limit affects your interest rates as well as change the way Home Loan EMI is paid. Read on to understand how an increased limit can help you relax your finances.
1. Know your Claim Type for Deduction
There are two kinds of benefits available to a Home Loan borrower under the Indian Income Tax Act, 1961. One allows you to claim tax deduction on Home Loan Interest Rates for up to Rs. 2 Lakh, in case of a self-occupied house (Section 24) while the other permits you, if you are a first time home buyer, to claim a deduction on the principal amount that you have paid towards the loan for your house and is capped at Rs. 1,50,000.
Remember that the deductions cannot be claimed while the house is under construction, but can be claimed only when the house construction is complete.
Once you have determined the kind of claim you are using, you can fill up the requisite form and make use of the Home Loan Deductions.
2. Benefit of Raised Deduction under Budget 2017
FICCI has proposed for a deduction of up to Rs. 3,00,000 under Section 24. This means that the tax deduction on Home Loan Interest Rates, which means you can save on a lot of money that would otherwise be paid as tax. FICCI has also suggested that the changes become applicable from the previous year, i.e. retrospectively. This gives you a lot more breathing room as far as interest is concerned, since you can use the deductions that you get to pay off your interest on your Home Loan that much more easily. This would mean that you as a borrower would get more time to claim a benefit on the pre-construction interests paid on a Home Loan. For instance, if you take a Home Loan in the financial year of 2016-17, you can claim a deduction of Rs. 2 lakh on the Home Loan Interest Rates from the end of the financial period, if the construction is finished within 5 years.
On January 4th, 2017, the Budget 2017 will be tabled in the Parliament, and a deduction raise can positively affect both your Home Loan Interest Rates and the Home Loan EMI that you would eventually be paying towards your home. That’s good news for all of us, since a lower interest rate and EMI is always appreciated in this expensive world.