As per the Income Tax Act, 1961, you can opt for tax exemptions when you take a home loan. You can claim these benefits on the home loan principal and on the interest as per Section 80C and Section 24 respectively.
Section 80C provides tax benefits up to Rs. 1.5 Lakh per financial year on various schemes like National Savings Certificate (NSC), Sukanya Samriddhi Yojana, Life Insurance premium, Senior Citizens Savings Scheme (SCSS), 5-Year Fixed Deposits, etc.
The section also provides a tax exemption for a home loan principal. You must complete the purchase or construction of the property within 5 years after availing the loan to claim these benefits. Furthermore, you must remain in possession of our property for at least 5 years after construction or purchase. The deductions previously taken will be added to the price of your property in case you have sold it. If you have invested in PPF or provident fund, then there are 6 Easy Steps on How to Withdraw PF Amount Online.
Section 24 provides tax benefits as standard deduction and deduction on the home loan interest.
As per standard deduction, 30% of your property’s Net Annual Value (NAV) can be exempted from tax. NAV is calculated by subtracting Municipal Taxes from Gross Annual Value (GAV). If you have let out your property, the GAV is calculated as the total rent received per year. When you are choosing the Fixed deposit, then the thing that you should remember is always say no to fixed deposit premature withdrawal.
You can claim deductions up to Rs. 2 Lakh on the total home loan interest only if you occupy the property. This section enables you to make claims even when your property is under construction. Here’s Everything about Income Tax Benefits on a Home Loan.
Both Section 80C and 24 can help you save tax when taking a home loan. Know how to claim home loan tax benefits under these two sections.