According to a report, the housing loan market has registered a 9.6% year-on-year growth in the third quarter of FY2021. A positive growth indicator reflects the demand for purchasing own property and private spaces among individuals. Moreover, the RBI’s decision of keeping the repo rate unchanged has lowered the housing loan rates for prospective borrowers.
In addition to that, the home loan tax benefit allows potential borrowers to save on their borrowed amount substantially. Hence, it is essential for the new and existing borrowers to keep themselves updated regarding the tax rules, starting with the documents required for this process.
Documents required for home loan tax advantages
Individuals are required to submit the following procedure in order to claim for home loan tax benefit:
- Property ownership documents
- Loan repayment documents, including principal and interest amount
- Documents substantiating the completion of house construction or the date of purchase
- Tax deductions under Section 24 (B) must be included. Moreover, deductions under Section 80 (C) must be mentioned where taxpayers must include their contributions under EPF, PPF, LIC premiums and the essential principal repayment against their home loan.
- Documents of interest received from savings account under Section 80TTA and Under Section G need to be mentioned as well.
- The loan must be taken on taxpayers name, and that document should be provided
- Payment of municipal tax documents
Borrowers must note that if they want to claim a tax deduction, they must inform their employer to adjust the TDS accordingly. Therefore, borrowers would not have to wait till the end of the year to determine their tax liability and adjust their tax.
Procedure of claiming home loan tax benefit
Claiming for tax benefits applicable on a home loan is a simple process. Following are the steps to be followed for tax deduction:
Step 1- At first, individuals need to calculate the tax deduction amount that needs to be claimed
Step 2- One needs to ensure that the house is in his/her ownership and he/she is the co-borrower of the loan
Step 3- Submit home loan interest certificate to the employer for adjusting the tax deductible amount
Step 4- In case you do not follow the steps mentioned above, you need to file an IT return on your own
Step 5- If an individual is self-employed; he/she is not required to submit these mentioned documents anywhere. They just need to keep these documents handy for future use.
Tax benefits on home loan
The Indian government has extended various schemes and programmes to encourage citizens to purchase their own property and upgrade living conditions. One of the significant ones to mention here is the tax exemptions applicable under various sections of the Income Tax Act.
Here is a detailed illustration of the housing loan tax benefits:
- Under Section 80 (C), individuals can claim tax deduction of a maximum of Rs.1.5 lakh on the principal repayment. Under this section, one can claim for stamp duty, and registration charges only once.
- Under Section 24 (B), individuals can enjoy maximum deductions of up to Rs.2 lakh on the interest payment. These deductions are applicable only on the property whose construction is completed within 5 years.
- Under Section 80EE, first-time homebuyers can claim an additional amount of Rs.50,000 on the interest paid in each financial year. But one must note that to claim these deductions, the home loan amount must not be more than Rs.35 lakh, and the property’s worth must be within Rs.50 lakh.
These are the essential ones associated with housing loan, which will aid borrowers in easing their repayment.
Therefore, knowing about the tax benefits, documentation, and claiming procedure will allow existing borrowers to structure their repayment efficiently. However, these facilities can be availed by individuals who fulfil the eligibility parameters and furnish undisputed documents.
Many leading housing finance companies extend pre-approved offers to credible borrowers that simplify loan applications and reduce the hassle of documentation. These offers are available on a wide range of secured and unsecured financial products. Borrowers can check their pre-approved offers online by mentioning their name and contact information.
Hence, having a detailed idea about the different sections of home loan tax benefit will assist borrowers in making an informed decision. However, it is suggested to stay updated regarding the tax rates and their eligibility to avoid a hassle in the long run.