2016 is the year of surprises and gifts. Rate cuts, cheaper loans, tax benefits have made this year great for home loan buyers. If you are also planning to buy a house, this is the right time. While buying a house, you negotiate with the property dealer and then with the banks to get the cheapest home loan deal. Even if you get the best deal with a lot of discounts, you might end up saving a few rupees because of your tax sheet. But if you know the rules of this game, you can get a maximum of the tax benefits. Here are the 5 hidden and frequently missed tax benefits on home loans:
- Tax benefits on the interest paid even if you missed an EMI: If you have taken a home loan and repaying it by paying monthly EMIs then you are liable to tax exemption. Even if you have missed some EMIs during a financial year, you can claim a deduction on the interest paid for the entire year.
- Principal Repayment Tax Benefit is reversed if you sell your property before 5 years: Under Section 80C, if you sell your property before 5 years from the date when you purchase it, your principal repayment tax benefit will get revered. The money that has been tax exempted during this period will get added into your annual taxable income of the year when you sold your property. You will be liable to pay that tax amount at the current tax rates.
- Save on the Processing Fees: Do you know that the processing fee that you pay to the lender on your home loan is tax exempted? Yes, it is true. According to Income Tax Act, Section 2(28a), the charges related to a home loan are tax exempted. It means the interest paid to the lender in any term comes under tax deduction. So you can save tax on the processing fees of your home loan.
- If you are borrowing from your relatives or friends, you can still get Tax Benefits: You are liable for tax benefits under Section 24C on the interest repayment for the loans borrowed from anyone. The purpose of taking a loan must be the construction of a house or buying a house. If you have not taken a loan from a bank, the interest is still tax exempted. All you have to do is to file an income tax return and show your tax and interest payments in it. You will only be eligible for tax exemption on the interest paid. You will not get all other tax benefits on a loan if you have not taken a home loan from a bank. You will also lose the additional benefits of Rs. 50,000 under Section 80EE.
- If you are a Co-borrower, don’t dream for a tax exemption: You cannot save tax if you are a co-borrower of a home loan. If the property is on the names of your parents and you are paying the EMIs as a co-borrower, you cannot claim a tax exemption. You must be at least the co-owner of the property to get a tax deduction. You are not eligible if you are only a co-owner. You must carry both the tags (a co-borrower and a co-owner) to get a tax exemption.
So, these are some facts that will help you to save tax. Now get your home loan with a lot more savings.