Different Types of Tax Benefits that you can get on Your Home Loans: Most of the people make their dream fulfill of owning a house by taking a home loan from the bank or other financial institutions to either construct a house or buy an apartment. Did you know that you can save on tax when you are repaying your home loan amount? A Tax Benefit is an allowable deduction on a tax return intended to reduce a burden on the taxpayer while typically supporting certain types of commercial activity. The amount of tax you can save, it also depends on the type of tax benefit that you are claiming because each tax benefit scheme offers a different form of savings.
While taking a Home Loan, a very important thing that to be kept in mind is the Tax Benefit on Home Loan. Tax benefits are included in our home loan plan and provide us many facilities and convenience. Income tax authorities provide some benefits and discount to the individuals who have taken home loans from any specified bank or financial institutions. Those people who have taken a home loan are entitled to the deduction under Section 80C, Section 24 and Section 80EE of the Income Tax Act. There are certain tax benefits of home loan that can help you to secure future for yourself and your family.
1) Protection for Family: Term Plan
Your family looks up to you because you are the bread earner for your family. So, you have the responsibility both for meeting the daily needs of the family and ensuring that the family’s future dreams are to be met. However, we all know that life is uncertain and hence it becomes the responsibility of yours that the family meets its requirement, even when you are not around them. This is when you add term insurance to your home loan plan. You can take a huge term cover at a small premium and ensure that cover amount will be enough to meet your family’s needs even in your absence.
2) Protection for You: Critical Illness Cover
Critical diseases like heart diseases and cancer have increased rapidly among metro cities this means it is essential to be financially prepared for this day and age. Therefore, the plans of critical illness are important. They have a one-time payment, no affiliation with any special hospital or any kind of duplication requirements they are available for longer terms and some products offer a premium discount for the entire period, with increasing costs and complications. It is necessary to consider special care against heart and cancer. At a time and age when lifestyle diseases are becoming more common, a health insurance plan is almost a necessity.
3) Tax Savings under Section 80C
The amount paid as repayment of the principal amount of Home Loan is allowed as the tax deduction under Section 80C of the Income Tax Act. Section 80C helps in reducing taxes as it allows the maximum number of instruments to avail a total tax exemption up to Rs.1,50,000 in a year.
However, the tax benefit of home loan under this section 80C for repayment of principal part of the home loan is allowed only after the construction of the house is complete and the completion certificate has been awarded. No deduction would be allowed under this section for repayment of the principal amount for those years during which the property was under construction.
4) Tax Savings under Section 80D
Under the Section 80D, the limit on the exemption for premiums paid towards self and family is Rs. 25,000. If you are a senior citizen, so this amount will be increased to Rs. 30,000. Another benefit you will get under this section is if you also pay premiums for a health insurance policy for your dependent parents, you can claim an additional exemption of Rs. 25,000 which increases to Rs. 30,000 if your parents are senior citizens. Therefore you can claim a total discount of Rs. 60,000 if you and your parents are senior citizens and you pay premiums for two separate policies for yourself and your parents.
5) Tax Savings under Section 24
Customer who availing a home loan from any bank or financial institutions can get the Tax Benefit on the Home Loan for payment of Interest is allowed as a deduction under Section 24 of the Income Tax Act. As per Section 24, the Income from house property shall be reduced by the amount of Interest paid on Home Loan where the loan has been taken for any purpose such as Purchase of a house, Construction of a house, Repair or Reconstruction of a residential house property.
Under Section 24, the maximum tax deduction allowed of a self-occupied property is subject to a maximum limit of Rs. 2 lakhs. In case if the property for which the Home Loan has been taken is not self-occupied, no maximum limit has been determined and the taxpayer can take the tax benefits of the whole interest amount under the Section 24.