It is safe to say that buying a property is one of the biggest financial milestones in every individual’s life. Though there are a plethora of home loans available to finance your real estate dreams and reduce the load of heavy payments, we always tend to look for better deals where you get highest returns. The good news is that there are a variety of tax savings options you can consider to minimise the load on your pocket while living in the security of your dream home. Let’s take a look at a few of them.
A home loan is one of the easiest and most convenient ways to fund your dream home. Apart from being a feasible option, a home loan also offers a multitude of tax benefits, making it a win-win for investors. Tax deductions can be claimed under Section 80C, 80EE and 24 (b) of the Income Tax Act, offering benefits on repayment of both the principal amount and the interest of the home loan.
Exemption for first-time homebuyers: If you are a first-time homebuyer, you are eligible for a tax claim of up to Rs. 50,000, under Section 80EE of the IT Act. This is an additional claim, apart from the deductions against the principal amount and interest. However, in order to avail this benefit, the property at stake should not be priced over Rs 50 lakhs and the loan amount taken should be lesser than or equal to Rs 35 lakhs.
Exemption on the principal: As per section 80C of the IT Act, homebuyers can claim up to Rs 1.5 lakhs as tax deductions against the repayment of the principal amount of their home loan. However, the owner needs to ensure that the property is under their possession for at least five years after taking ownership to avail this deduction. In case the property is sold within five years after possession, the deductions claimed will be included back in the taxable income of the owner during the year of sale.
Exemption on the interest: The homebuyers can avail a tax deduction of up to Rs 2 lakhs against the interest paid towards the home loan, as per Section 24 of the IT Act.
Exemptions on joint loans: As per Section 80C of the IT Act, both the applicants of a joint loan can avail tax deductions, if they are the co-owners of the property. Each applicant is eligible for a deduction of up to Rs 2 lakhs against the interest amount and Rs 1.5 lakhs towards the repayment of the principal amount.
Exemption on stamp duty
Apart from the tax benefits of a home loan, investors can also avail deductions against legal charges like stamp duty and registration. As per Section 80C of the IT Act, home-buyers are eligible for a deduction of up to Rs 1.5 lakhs during the year of the purchase. However, you have to meet the following criteria to avail this benefit:
It is important to note that this deduction can be availed by both an individual and a Hindu Undivided Family (HUF) to get the most out of your tax returns.
GST benefit for affordable housing
In an effort to encourage homebuyers to invest in the affordable housing segment of the nation, the government of India is offering the benefit of subsidised GST rates. Investors from the Low Income Group (LIG), Middle Income Group (MIG) and Economically Weaker Sections (EWS) can now enjoy a lower concessional GST tax of just eight per cent. Apart from this concession, homebuyers will also be getting an interest subsidy through the Credit-Linked Subsidy Scheme (CLSS). Furthermore, the government is pushing sales in affordable housing by refraining developers from charging GST in any form, since the pre-mentioned eight per cent of GST will be cancelled out against the input credit.
To add to that, as per Section 80-IBA of the Income Tax Act, projects that are approved after June 1, 2016, and before March 31, 2019, are eligible for tax deductions. However, the recently-announced Budget 2019 has exceeded this period by a year – till March 31, 2020. This only proves that the government is going the extra mile to increase the number of affordable housing projects and push homebuyers to invest in them.
Another interesting highlight of Budget 2019 was the benefit of rollover capital gains over two residential properties instead of one. As per Section 54 of the IT Act, an individual is eligible for tax exemption when they sell one property and invest the gains in another. The recent Budget 2019 has extended this benefit and enabled taxpayers to invest in two residential properties for capital gains up to Rs 2 crore, for once in their lifetime.
With so many benefits at stake, there is no doubt that buying a property opens up a multitude of opportunities to save tax and enjoy returns. Apart from reducing your financial load, real estate investment also makes you the proud owner of a beautiful home, which is a priceless feeling. Looking for a property to invest in? Check out Assetz Property Group’s wide range of premium projects in vibrant localities and upgrade to a loving home.