HOME LOAN TAX BENEFITS ONE MUST CONSIDER
You can claim tax benefit on interest paid even if you missed an EMI
Section twenty four of the I-T act mentions the word interest payment payable on housing loan. It means although you've got lost the EMI payment during a year you can still claim the tax write-off thereon. It can be claimed as a deduction so long because the interest liability is there.
One should retain the copy of the interest certificate issued by the lender i.e. bank or NBFC specifying the amount of loan, interest due etc. as this will help in case of any questioning from the tax department."The principal repayment deduction under Section 80C, however, is available only on actual repayments.
You are eligible for tax break only when you are a co-borrower and co-owner
You cannot claim a tax break on a home loan even if you may be the one who is paying the EMI. For instance, there may be a situation when you're paying the EMI of a home loan for the property which is owned by your parents or spouse. Even if you own a property with your spouse, you can't claim deductions if your name's not on the loan book as a co-borrower.
Principal repayment tax benefit is reversed if you sell before 5 years
While the finance minister may have provided a relief by reducing the holding period to 24 months to qualify for the long-term capital gains but if you sell a house within five years from the date of purchase, or, five years from the date of taking the home loan, the tax benefit gets reversed.
You can claim pre-construction period interest for up to 5 years
Any interest paid on the borrowing during the construction of a house is eligible for tax relief only after you have received the completion certificate.
While filing returns for the AY 2017-18, the maximum limit for the self-occupied property is Rs 2 lakhs. In the case of let out property, there is no limit. The union budget 2017 has removed this anomaly and put the cap of Rs 2 lakh on the let out property. The same will be effective while filing the returns for next year i.e. 2018-19.
Re-introduction of the Section 80EE
To provide an additional relief to the homebuyers, the section 80EE has been reintroduced with effect from April 1, 2017. The maximum deduction available has been reduced from earlier of Rs 1 lakh to Rs 50,000 now.
However, this deduction comes with certain restrictions which need to be satisfied while availing this deduction. The conditions are:
a) The home-owner/s should be first time buyer even if the property is bought in the joint ownership,
b) The loan value must not exceed Rs 35 lakh and property value should not exceed Rs 50 lakh, and
c) The loan must be sanctioned by a financial institution during the period April 1st, 2016 to March 31st, 2017.
If the taxpayers are able to meet conditions for both of section 24 and 80EE, their taxable income can be reduced by 2.5 lakhs in FY 2016-17 return filing.
Loans from relatives, friends and employer are eligible for tax deduction
If you have taken a loan from friends and/or relatives to acquire a house then you can claim a deduction under Section 24 for interest repayment on loans. You can also claim a deduction for money borrowed from individuals for reconstruction and repairs of property.
However, one must remember that this rule is only applicable for interest repayment. You cannot avail the tax benefits available on the principal repayment on that part of the loan borrowed from your relatives, friends and employer.
Processing fee and other charges are tax deductible
Most taxpayers are unaware that charges related to their loans such as processing fees or prepayment charges qualify for tax deduction. As per law, these charges are considered as interest and therefore deduction on the same can be claimed. Section 2(28A) of I-T Act defines interest as interest payable which includes any service fees and other charges in any manner in respect of money borrowed.