The Tax Advantages of Making Home Loan EMI Payments
The Indian government has long encouraged individuals to own homes. As a result, Home Loans are eligible for the Section 80C tax deduction. Furthermore, when you purchase a home with a Home Loan, you are eligible for a number of tax benefits that can help you save money on your taxes. Individuals can still use the previous tax system to claim special tax benefits like HRA and other reductions under Sections 80C, 80D, and so on during the current Fiscal Year 2021-22. Individuals can choose to follow the new regulatory framework (which has a reduced tax burden and no tax exemptions) or the previous regulatory structure. Home loan EMI payments provide tax benefits: Interest on a home loan is deductible: The policyholder's house must be completed within 5 years of the financial year in which the loan was taken. Section 24 allows you to deduct the interest part of your EMI payments for the year up to a maximum of Rs 2 lakh from your total income. Interest paid during the pre-construction period is deducted: The income tax legislation allows you to claim such interest, known as pre-construction interest, in addition to any other deductions you may be entitled to claim from your house property income. The maximum sum that may be claimed is Rs. 2 lakhs. Principal repayment deduction: The primary portion of your EMI for the year is deducted under Section 80C. The claimed amount is limited to a maximum of 1.5 lakhs. To qualify for this credit, the residential property must not be sold within the first five years of residence. Otherwise, your income in the year of sale will be reduced by the earlier decrease. Stamp duty and registration fees are deducted: The charge for Stamp Duty and registration can also be deducted under section 80C, in addition to the financing amount. However, this claim must be lodged in the same year as the spending. Assuming you meet the criteria, all House Loan-related deductions combined can result in a maximum deduction of 5 lakhs (2 lakhs under section 24, 1.5 lakhs under section 80C, and 1.5 lakhs under section 80 EEA). If you want to buy a new house, you may organise your purchase such that your financing allows you to take advantage of as many tax breaks as possible.