A home loan is a big responsibility, with several aspects to take into account beforehand. All buyers are sure to pay attention to mortgage eligibility criteria and documentation and compare mortgage interest rates offered by different lenders, but many overlook the fine print. An important aspect to consider is the tax benefit for home loan provided in section 24b for all borrowers under the IT Act. It has several nuances that one should be familiar with. Visit Green Day Loans to learn more about loan incentives that can benefit potential buyers.

  1. Deductions for the provision of Article 80c may be waived

The section 80c deduction is a mortgage tax benefit that allows you to claim up to 1.5 lakh per year for principal repayment. That’s a considerable amount, especially since you can claim it every year for the entire tenor. However, this deduction can be waived if you sell the house within 5 years of the mortgage loan. Once canceled, the amount is added to your taxable income for the year in which you made the sale, and it will be taxed at the rates in effect at that time.

2. Home loan processing fees can be claimed as a franchise

When you opt for a home loan, lenders usually charge a processing fee, which is the fee incurred to sanction and process your loan. In some cases, the processing fee can be quite a large sum as lenders usually charge a percentage of the loan amount. While some banks have an upper limit of Rs 25,000 or Rs 50,000, many others do not extend this benefit. Fortunately, according to section 2 (28a) of the IT Act, this processing fee is considered an interest payment and you can claim a deduction for it.

3. Section 24b deductions can be claimed on private loans

Private loans are those offered to you by friends, family or high net worth individuals. These loans also allow you to benefit from deductions, but only if you comply with the terms of use. As long as you are using the loan to buy a house, build a house in less than 5 years, repair a property or rebuild a house, you can claim deductions under section 24b.

In such an arrangement, the lender must charge reasonable interest, provide a legal certificate of interest, and deposit the interest income when filing the income tax. It is also important to note that this advantage only applies to the repayment of interest and that you cannot claim a deduction for the repayment of principal.

4. Tax deductions for mortgage loans can only be claimed by co-borrowers and co-owners

It is quite common for couples or family members to opt for a joint home loan. There are several advantages to doing this, among which are the tax deductions available to borrowers. However, it is essential to note that only co-borrowers and co-owners can benefit from tax deductions for home loans under the Information Technology Act. If you are simply listed as a co-borrower, you will not be able to claim these benefits even if you pay your fair share of IMEs.

5. Joint mortgage borrowers can benefit from individual tax advantages

All individuals in a joint home loan registered as co-borrower and co-owner of the property can benefit from individual tax benefits. For families with husbands and wives paying EMIs on a joint home loan, this could effectively double the tax savings. However, note that the combined demand for principal and interest repayment cannot exceed the actual amounts repaid in the given year.

Overall, being aware of the tax benefits of a home loan is essential for securing savings. In addition to tax benefits, another important practice for ensuring savings while receiving a home loan is to compare the different offers on the market. A great option to consider is the home loan offered by Bajaj Housing Finance Limited.

This home loan has several convenient features to make sure you borrow hassle-free. In addition, their offers include loans with the option of a flexible repayment rate. You also benefit from a mortgage interest rate to help keep the outgo optimal. Other notable features include a pan-Indian integrated branch network, online access to loan details, and fast loan processing protocols. To take advantage of these benefits today, apply online by simply sharing basic information.