Purchasing or building a home is a significant milestone for individuals, often requiring financial assistance in the form of home loans. Beyond the satisfaction of homeownership, there are additional perks that come with having a home loan – tax benefits. In this blog, we will explore the various tax benefits available to homebuyers under different sections of the Income Tax Act.
Tax Benefits Under Section 24(b):- One of the primary sections providing tax benefits on home loans is Section 24(b). Under this section, individuals can avail a deduction on the interest paid on their home loans. For self-occupied properties, the maximum deduction limit is Rs 2 lakh annually. However, for non-self-occupied properties, there is no such limit. This deduction can significantly ease the financial burden of home loan interest.
Tax Benefits Under Section 80C:- Section 80C offers a deduction on the principal amount repaid towards the home loan. Homebuyers can enjoy a tax deduction of up to Rs 1.5 lakh annually under this section. This deduction encourages individuals to focus on repaying the principal amount, providing long-term financial benefits.
Tax Benefits Under Section 80 EEA:- Introduced to promote affordable housing under the Pradhan Mantri Awas Yojana CLSS Scheme, Section 80 EEA offers an additional deduction on interest paid for home loans. Homebuyers can claim a deduction of Rs 1.5 lakh annually under this section. It is essential to note that this benefit is exclusive to the Pradhan Mantri Awas Yojana CLSS Scheme.
Tax Benefits Under Section 80 EE:- First-time homebuyers can leverage Section 80 EE to enjoy specific tax deductions. Under this section, individuals can claim an interest deduction of up to Rs 50,000 annually. This provision aims to support and encourage individuals taking the significant step of buying their first home.
Criteria for availing tax benefits
It’s crucial to be aware that these tax benefits are available only to those who have opted for the old tax system. Individuals following the new tax system may not be eligible for these deductions. Therefore, it’s essential to evaluate and choose the tax system that aligns with your financial goals.
Understanding and utilizing the tax benefits associated with home loans can significantly impact your financial planning. Whether it’s deductions on interest under Section 24(b), principal repayment under Section 80C, or additional benefits for affordable housing under Section 80 EEA, being informed allows you to make the most of your investment in a home. First-time homebuyers can also benefit from Section 80 EE, making the path to homeownership more financially viable. As you embark on your homeownership journey, consider consulting with a financial advisor to ensure you maximize these tax benefits and secure a prosperous financial future.