Under government Income Tax act we have some tax Benefits in all government and private sectors including home loan. The tax benefit under Section 24 and Section 80C is available from the financial year of which house is acquired or construction is completed. The interest paid can be managed and the tax benefit can be claimed under Section 24 in equal instalments over the next coming five years. There is no tax benefit for principal repayment or interest payment for under construction property.
For example, if you take Rs. 10 lakhs loan for 20 years at 10% rate of interest. Full EMIs began from the same year. You would have paid 32 EMIs. You would have paid interest of Rs. 2.24 lakhs in the give time period. If you have proper Tax benefits, than you can claim some amount of paid your loan amount. For the interest paid prior to financial year in which the house was acquired the interest have to be paid. Some of the tax benefits are listed below…
- Pre-construction rate of interest will be very less. We need to add the entire pre-construction interest and claim it in five equal installments.
- Under section 24 of income tax act there may be tax reduction up to 2 lakhs for principal repayment amount.
- Rate of interest will be reduced. The interest payments for year by year shall result in a loss under the head of income from house property. This loss can be converted as profits as heads of income in your income tax return including salary.
- Registration charges and stamp duty charges will be reduced. Along with reduction in principal repayment amount stamp duty and registration charges are also allowed to be claimed under the section of 80C.