Home loans or home finance refers to the loan amount secured to buy a home or construct or refurbish one. The LTV ratio for s can go as high as 90%. The LTV ratio is especially higher in the case of low-value loans. The amount sanctioned is generally higher for low-value properties. For high-value properties, the LTV ratio automatically goes down. Home loan rates in India are highly economical, making loan repayment easy and stress-free.
Additionally, housing finance helps buyers maintain liquidity and prepare them for personal or professional crises. Lastly, home loan tax benefits help reduce tax liability, helping borrowers save significantly each year. This article focuses on simple tricks that one can employ to maximize housing loan interest deduction. So, read on to know how to benefit the most from your home loan.
Simple Tips and Tricks on How to Maximize Housing Loan Interest Deduction
Maximizing Housing Loan Interest Deduction Under Section 24(b)
If you are a home loan borrower, you must know everything there is to know about Section 80C and Section 24(b) of the Income Tax Act. Section 80C tells you everything you must know about how to claim tax benefits on the principal component of your home loan. Here are a few simple tricks to help you maximize home loan tax benefits under Section 24(b).
- All home loan borrowers must know that if they have more than a single home loan, they can claim tax benefits on payments they are making towards the repayment of all the home loans. However, there is a maximum limit defined for claiming tax benefits under this section. The maximum limit is set at Rs.2 Lakh, which essentially means that even if you are repaying more than a single home loan, while you can claim tax benefits on all the home loans, the maximum amount claimed under Section 24b cannot exceed Rs. 2 Lakh.
- This, however, is not the case for homes that are rented out. The maximum limit of Rs.2 Lakh mentioned under Section 24b applies only to self-occupied properties. If you have invested in a property and are renting it out, you can claim tax benefit on the entire amount you are paying towards the repayment of the interest portion of your loan.
- These days, many people invest in under-construction properties. Under-construction properties deliver a better return on investment as they are available at a discounted price. If you are buying an under-construction property, know that you can maximize the tax benefit on home loan by claiming a home loan interest deduction in five equal installments after the construction on the property is complete. However, the pre-construction interest and the post-construction interest combined cannot exceed Rs.2 Lakh in any given financial year.
- Yet another easy way to increase housing loan interest deduction is to avail of a joint home loan and claim home loan tax benefits separately. There are a few key considerations here, however. To start with, it is important to know that lenders have strict rules about who you can add in as a co-borrower. Spouses, children, siblings, and parents are the people allowed to be added as joint loan borrowers. Further, one must never borrow a home loan jointly with someone who is not reliable or cannot be trusted with timely repayment of loan EMIs. Those who have availed of joint home loans can maximize home loan interest deduction by claiming tax benefits separately under Section 24b of the Income Tax Act.
- Additionally, first-time homebuyers can also claim home loan interest deduction and maximize their benefits by claiming home loan tax benefits under Section 80EE and Section 80EEA. Both these sections offer additional tax benefits to first-time homebuyers who had no other property in their name at the time of applying for the loan. However, if you want to avail of tax deductions under these sections, you will have to meet all the eligibility requirements or qualifying criteria, which are many.
If you are planning to apply for a home loan, use the information provided here to your best advantage. You can also increase your tax savings by using some of these tips to maximize home loan deduction on the principal component of your home loan.
