A Look At Tax Incentives To Home Loan Borrowers Which Taxpayers Can Claim?

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Home Loan Borrowers are provided few of the tax incentives as either tax break or exemption for serving such a large ticket-size loan. After the Union Budget announcement on February 1, 2017, few of the changes were effected, knowing which come in handy for them at the time of making a claim while filing tax return.

1. Maximum deduction on interest for home loan set at Rs. 2 lakh from FY 2017-18

Barring taxpayers who deal in real estate, all taxpayers will have a maximum exemption of Rs. 2 lakh for the interest paid on capital borrowed to purchase a home or for any other investment. The earlier provisioms allowed such interest paid to be set off against the rental income without any prescribed limit.

2. Exemption can be claimed even when the EMI is missed in a year:

As long as the interest is payable on the housing loan, taxpayer is allowed a tax advantage in lieu of it as a deduction. The said deduction is allowable also in a condition when the borrower defaults on EMI payment.

Tax advantage as holiday available to only owners of the house

There can be a scenario where you just are servicing the debt of the loan but are not the owner of the property, (For you to qualify as the owner of the premises, you need to contribute towards the cost of the house in terms of financial consideration) in such a case you cannot claim the tax holiday.



Deductions of a maximum Rs. 50,000 allowed as per Section 80EE

The section 80EE has been re-introduced as a aid to homebuyers to provide a deduction to the extent of Rs. 50,000. The tax-relief as per the section is available only to new home buyers who have taken a home loan of not over 35 lakh and whose property values less than or equal to Rs. 50 lakh. Also, the financing of such loan should have been effected in the previous FY i.e. April 1st, 2016 to March 31, 2017.

Property holding period reduced to two years time to qualify as Long Term Capital Gains Asset

For qualifying as a long term capital gains asset, the Union Budget for the year FY 2017-2018 has reduced the holding period to two years time.

Tax deductions against any processing charges or pre-payment penalty can be claimed

Also any amount paid as stamp duty or registration charges can be claimed as a deduction.

Deductions allowed for loan from individuals or employer for renovating or buying home:

Income Tax also provides for any amount paid as interest to relatives or institutions to be claimed as deductions

Deduction on Principal Amount Repayment u/s 80C:

In case of property sale in five years time from the date of home loan grant, the repayment benefit realized on principal payment gets reversed. Any deduction claimed shall then be added as income for the year in which property sale gets materialized. Principal amount on home loan is eligible for deduction u/s 80C to the maximum amount of Rs. 1.5 lakh.

Story first published: Thursday, May 11, 2017, 13:48 [IST]
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