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Is It Good to Take Home Loan to Save Tax in India?
Posted on Wednesday, May 8th, 2024 | By IndusInd Bank
Summary: With features such as flexible tenure and high loan amounts, home loans are ideal for purchasing or constructing a house. Home loans in India also offer borrowers tax savings under the Income Tax Act, 1961. Borrowers can claim tax deductions on the principal repayment, interest repayment, and stamp charges under different sections of the IT Act. With IndusInd Bank, customers enjoy transparent documentation, doorstep assistance, balance transfer facility, easy eligibility criteria, attractive interest rates, and flexible tenures.
A home loan is one of the best credit vehicles for individuals looking to realize their dream of home ownership. From flexible tenures to high loan amounts, this financing option is ideal for purchasing or constructing a house on a residential piece of land. Additionally, home loans in India offer borrowers tax savings as stipulated by the Income Tax Act of 1961.
Such tax deductions allow borrowers to save money in each financial year. However, tax planning, on the whole, requires a meticulous and holistic approach based on your income. To understand the nuances of tax savings on a home loan, let’s understand the applicable tax deductions and their associated conditions under the IT Act.
Tax Deductions on Principal Repayment
Section 80C of the IT Act allows loan applicants to claim a deduction on the principal amount of a home loan EMI. In a financial year, the maximum amount that can be claimed is INR 1.5 lakhs. However, to claim this deduction, the house should not be sold within 5 years of possession.
Tax Deductions on Interest Repayment under Section 24(b)
Section 24(b) of the IT Act allows borrowers to claim a tax exemption of up to INR 2 lakhs on the interest repayment for home loans. To claim this deduction, the loan must be taken for the purchase/construction of a house, and the construction must be completed within 5 years from the end of the financial year in which the loan was taken. If the construction exceeds 5 years, only a deduction of INR 30,000 can be claimed for the financial year.
Tax Deductions on Stamp Duty
Under Section 80C of the IT Act, borrowers can claim a deduction for stamp duty and registration charges in the year these expenses are incurred, within the overall limit of INR 1.5 lakhs.
How to Maximize Tax Benefits on a Home Loan
You can maximize tax benefits on a home loan by applying for it jointly. For joint home loans, each borrower can claim a deduction of up to INR 2 lakhs on the interest repayment and up to INR 1.5 lakhs for principal repayment. The borrowers must also be co-owners of the property to be eligible for this double tax deduction. In this way, you can maximize the tax benefits on a loan.
Apply for Easy Home Loans with IndusInd Bank
Home loans offer an excellent avenue to purchase your dream home while reducing your tax liability. IndusInd Bank takes the benefits of a home loan a notch up by offering the following:
– A wide range of loan products
– Doorstep service with fast and easy processing
– Attractive housing loan interest rates
– Convenient balance transfer facility
– Transparent and no hidden charges
– Simplified documentation
– Funding up to 30 years of tenure
With a wide variety of products, competitive interest rates, and quick in-principle sanctions, IndusInd Bank endeavours to make your home loan journey as smooth as possible.
To know more, visit the IndusInd Bank website and apply for a home loan online today.
