Buying a “Dream Home” is one of those life achievements that tops almost everybody’s bucket list. Regardless of whether you prefer a modernized urban space or a humble rural home, you hope to locate a home that feels like it was made explicitly for your family. Having said that, looking for your dream home accompanies different considerations “finances” being the most noteworthy one. After all, buying a house is a huge commitment. Therefore, individuals often take the assistance of a home loan to turn this dream into a reality.
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A home loan is one of the most convenient sources of finance that helps you fulfill your dream of owning a beautiful house. But did you know that your decision to buy a house can also benefit you when it comes to taxes? Meaning, just as there are different investments for tax exemption, a home loan too can help you avail tax benefits.
Section 24B of the Income Tax Act can be of huge help here. This section can help you avail the interest on housing loan deduction for FY 2019-20.
Let’s understand in detail what this section has to offer.
What is this Deduction u/s 24B?
Section 24B of the IT Act allows you to claim the tax deduction on home loan for payment of interest. Basically, it deals with exemptions on the interest part of your home loan where the loan was taken for the purpose of:
5) Reconstruction of property
What is the Maximum Deduction Limit u/s 24B?
The maximum deduction allowed u/s 24B for a self-occupied property is subject to a limit of Rs. 2 lakhs. However, if the property for which the loan was taken is not self-occupied, you can avail tax deduction on the entire interest amount.
If the property is not self-occupied on the grounds that the owner is residing in any other place due to his profession, employment, or business, then the maximum amount of tax deduction allowed is Rs. 2 lakhs only.
What is the Deduction In Case Of Co-borrower?
Tax benefits are available to all the joint owners on a joint home loan. However, to avail, any tax benefits against the property, ‘ownership’ in the property is a pre-requisite. Meaning, unless the person is an owner in the property, he is not entitled to the tax benefits.
For instance, if your father owns the property and you have taken up a loan for the same. In such a case, since you are not a co-owner in the property, you are not eligible for the tax benefits on your home loan.
Deductions available for co-borrowers:
In the event that the loan is taken on joint names, at that point, the deduction is allowed to each co-borrower in proportion to his/her share in the loan (maximum up to Rs. 2 lakhs each).
If one of the co-owner is repaying the full loan amount, then the deduction on the full interest amount can be claimed by him.
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What is the Difference Between Section 80C and Section 24B?
While section 24B allows deduction on the interest on a home loan, Section 80C provides deduction on the ‘Principal’ part of the loan. Given below is a comparison between these two sections to understand this better.
Availing a home loan sure brings with it financial costs in the form of EMIs. But it also has its own benefits. It helps you to reduce your tax outgo by offering benefits under Section 24B.
So, smartly use your house loan to fulfill your aspiration of owning your dream space, and also avail the ‘interest on housing loan deduction’ for AY 2019-20.
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Buy Your Home to Avail Additional Deduction u/s 24B in AY 2020-21
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