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Income Tax Rules on Home Loans after Budget 2017!

Loans are quite helpful if they are used properly. Home Loans are one of the most in-demand loans under the current scenario. If it were not Home Loans, many people would never be able to own a home. The real estate prices are soaring. Moreover, because of this, the prices are constantly going up. In such a case, Home Loans has been a boon for people who have a certain amount but are lacking sufficient finance to buy a home.

Home Loans are more encouraging than ever. The government has introduced various measures which have led to a favorable climate for Home Loans. Various initiatives and policies such as “Housing For All” and “Pradhan Mantri Awas Yojana” has encouraged home buying. Apart from that, current years’ budget has brought about many changes in Income Tax rules. Let us understand some of them:

Tax Deduction: Loan borrowed from an employer, private lender or friend is eligible for tax deduction. However, only the rate of interest is eligible and not the principal amount. For this, it is essential that a borrower must have a certificate from a lender.

Under-Construction apartments: As per the new instruction, you can claim the total interest that you pay in five equal installments when your property is under construction. It will take into account the commencement year till the time you move-in. The maximum amount that you can claim, however, is up to 2 lakhs when it comes to self-occupied property.

Joint Home Loan: If you decide to borrow a Joint Home Loan then it would be a wise decision for you. If you co-borrow with your spouse, for instance, you are entitled to receive a tax deduction of up to INR 2 lakhs each. It can even work for 3 people if a borrower and his working son and daughter are involved. For people who have a second house, it is quite important that you keep it on rent as an empty house will attract tax.

House repair: A deduction of 30% of gross value can be asked to make up for the maintenance and repair expenses. Even the municipal taxes are eligible for the deduction irrespective of their year. However, this is not possible for a self-occupied property.

Principal amount tax benefits: It is common knowledge that EMIs are divided into two parts – the principal amount and the rate of interest. As per the current budget, the principal amount is eligible for a tax deduction through your gross income. However, the overall cap is set as INR 1.5 lakhs.

Interest amount tax benefits: If you are paying interest on a self-occupied property then you can avail a tax deduction of up to INR 2 lakhs. However, it has to be treated as income from house property. Under this point, it is essential that the construction is completed within five years period. i.e. when the loan was borrowed. If failed to do so, only INR 30,000 can be claimed as a tax deduction. Apart from this, first time home buyers can avail up to INR 50,000 through interest benefits after the fulfillment of certain conditions.

These are few of the changes that have been introduced by the government through this years’ budget. Aforementioned points were a few of the benefits that are available under Home Loans. The majority of them are tax-related benefits.