Home loans are an advantage in assisting you to have your own house. Now that there is a positive change in home loan interest rates, your desire to own your own home can now turn into a reality.
Buying a house of your own gives you mental satisfaction and also provides financial security to your family. Many people achieve their dream of owning a house of their own by taking a home loan, but not all are aware of home loan tax benefit.
In case you need to lessen the financial burden associated with buying your own house on loan, then you can always opt for the Pradhan Mantri Awaas Yojana (PMAY). It is a credit-linked subsidy scheme that offers subsidized home loans to the economically weak and middle-income group. Under this scheme, the applicant can receive an interest subsidy of up to 6.5%, depending on the income group you are in. And this comes with tax benefit too.
Along with PMAY, you need to do thorough research on which options can help you with lower interest rates as well as tax benefits. And this can be done with ease by visiting different websites of lenders, analysing their options, and following the news to track changes brought about in the annual budget for the nation.
A list of changes in the 2017-18 budget in home loan structuring and interest
A major change in the financial year 2017-18 is a deduction on home loan interest, which is now same for both rented and self-occupied property, i.e. Rs 2 Lakhs.
Adding to this, another feature in the financial year 2017-18 is that it aims to confine the loss on house property that can be reduced from ‘other parts of income’ such as ‘salary income’ to Rs 2 lakh only.
Following are the noteworthy tax savings on home loan changes, according to various classifications as per the financial year 2017-18:
- Benefits of the self-occupied property
Those with a self-occupied property are presently allowed to claim interest paid up to Rs 2 lakh on a home loan in case construction is completed within 5 years of the start of the loan (under Sec 24). It will be Rs 30,000 if construction period exceeds 5 years from the end of financial year in which loan was taken.
If the cost of the house is below Rs. 50 lakhs and the home loan amount is below Rs. 35 lakhs, then first-time home buyers can avail of additional exemption of Rs. 50,000 (under Sec. 80EE). This is applicable to all loans sanctioned after 1st April 2016.
The maximum principal amount eligible for deduction (under sec 80C) remains at Rs 1,50,000.
- Tax Benefits on Rented House:
If the second home is rented out, then the principal and interest will be treated as below
- Principal – The maximum principal amount eligible for deduction under Section 80C remains at Rs 1,50,000. But this is only available if the assessed has a valid reason for not staying in the house and giving it out on rent (e.g. staying in another city for job/work commitments)
- Interest – The lower of the below two will be applied
- 2 lakh
- Actual interest paid for all home loans on houses owned by the assessed
When you use a home loan calculator, you can determine how much tax savings you can obtain based on this guideline. This way you can get better savings on your home loan repayments.