What are the tax benefits on home loans after budget 2014?

By Ambari Datta Gupta

Updated: Thursday, July 17, 2014, 15:07 [IST]

What are the tax benefits on home loans after budget 2014?

Finance Minister, Arun Jailtey in his maiden Union budget 2014 gave a good news to all who have taken a home loan. He has increased the tax exemption on the interest paid on home loans by Rs. 50,000. So, tax benefit limit on interest is now capped at Rs. 2 lakh, hiked from the previous limit Rs. 1.5 lakh.

In this budget, Arun Jaitley has also increased the maximum tax benefit under 80C to Rs 1.5 lakh from Rs. 1 lakh. Benefit for repayment of principal amount is available under section 80C.

However, this deduction includes all other deductions allowed under section 80C like PPF, NSC etc. So, tax benefit for repayment of principal, PPF, NSC etc. under section 80C is capped at Rs. 1.5 lakh. If you claim benefit of Rs. 1 lakh for repayment of loan then you are left with Rs.50,000 to claim for exemptions on PPF, NSC etc all combined together.

But you should keep in mind that the benefits are applicable on completed houses. So if you pay interest on home loan while your house is under construction then you can get benefit on interest payment only when the construction is completed.

Buying a house means a long term investment. When we buy a house we usually take a home loan of 15 to 20 years. To choose the best of home loan click here.

If you own two houses then you have to pay taxes on the one you are occupying yourself. It will be considered as residential property. The other house will be considered as "deemed to be let out." If you own two houses then know the tax implications here.

You can take a loan either on fixed interest rate or on floating interest rate depending on your choice. To know the difference between them click here.

Conclusion

A house is also considered as an asset. With the limit raised on tax benefits on home loan, you can now start dreaming to own one.

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