You must be buried under piles of paper at this time of the year; vigorously working to make the most of your tax saving options. But, are you sure you are claiming all the deductions you possibly can on your Home Loan? All… well, not sure huh? No need to panic. Everything we are about to tell you is sure to help you save more of that tax money.
You probably don’t remember all the details of the latest budget. When the budget was announced almost a year ago the highlight was the addition of new tax sops on Home Loans. We are here to refresh your memory about them. No, you don’t have to go in for a new Home Loan. Your existing Home Loan can help you do that.
So, without any further ado let’s list them down.
Additional Reading: Home Loans = Tax Benefits
Home Loan Deduction Gets Better
Before we delve into the details, let us remind you that this benefit is solely for people who have taken a Loan to purchase their first house.
As per the 2015-2016 budget, section 24 of the Income Tax Act stated that a Home Loan borrower could claim deductions of up to Rs. 2 lakhs a year on the interest paid on a Home Loan.
However, the 2016-2017 budget has raised this limit by Rs. 50,000. This additional limit is to be deducted under Section 80EE of the Income Tax Act. Therefore, the total deduction that can be claimed is Rs. 2.5 lakh. Pretty cool, we say!
But, there are terms and conditions you need to meet to avail of the additional Rs. 50,000 benefit.
- This benefit is rolled out only for first-time home buyers.
- The cost of the house should not exceed Rs. 50 lakh and the loan amount should be no more than Rs. 35 lakh.
- This is eligible only for loans sanctioned between April 1, 2016 and March 31, 2017.
- You can claim this deduction till you repay the loan.
- Note that if you have purchased your first home with plans of renting it out, you can claim interest deduction under Section 24. Here. There is no limit to the deduction under this section. Purchased it for self-occupation? Then, you can use Section 80EE because unlimited interest deduction will not be available to you.
Additional Reading: Why You Should Get A Home Loan Now
Timeline For Tax Benefits Extended
As per the old budget, the aforementioned Rs. 2 lakh deduction on Home Loan interest payments was applicable only if the acquisition or construction of the house was completed within three years from the end of the financial year in which the loan was taken. You could wash your hands off this deduction if the builder delays the project completion date, which is very often.
To ensure that Home Loan borrowers do not suffer due to carelessness of the builders, the government extended this tenure by two years in the latest budget. This means that you have five years from the end of the financial year in which the Home Loan was taken, within which the construction of the house must be completed or to take possession of it. This is amazing news for those whose three year tenure was coming to an end in 2017.
Additional Reading: Union Budget 2016-17 – Highlights
If you don’t receive HRA here’s relief
While most employers provide HRA benefits to their employees, there are some who do not. This hurts the tax saving scope of salaried individuals. To remedy this, those who do not receive HRA and pay more than 10 percent of their total basic salary as rent can claim deduction under Section 80GG of the Income Tax Act.
The deduction under this section is on the least of the following.
- 5,000 per month. This was raised from Rs. 2,000 in the 2016-2017 budget.
- Rent paid minus 10% of the total income
- 25% of the individual’s total income
Additional Reading: Home Loan Handbook: All Questions Answered
Now that you have all the updated information, revisit your Investment declarations and check if you have missed claiming any of these new options.
If you are looking to get that Home Loan then now is the time. Click the link below to compare and buy a Home Loan online.