You can save tax up to Rs 5 lakh on home loan, here's how

Buying a house is everyone's dream. People save money so that they can get shelter for the family. The government also wants you to buy a house, that is why it also gives various tax exemptions on home loans. That is, by buying a home through a home loan, your dream of getting a house is fulfilled and you also save a lot of tax. 

If you learn about this before buying a house, then you can save tax up to Rs 5 lakh annually.

1. Tax exemption on the principal amount

You can claim tax exemption under 80C on the principal part of the home loan. The maximum limit of 80C is Rs 1.5 lakh, i.e. every year you can save up to Rs 1.5 lakh as tax under 80C. However, it must be noted that you cannot sell this property for 5 years after getting the possession, otherwise whatever deduction or exemption you have taken before this will be added to your income.

2. Tax Exemption on Housing Loan Interest

If you are paying the EMI of a home loan, then it has two parts, first interest payment and second principal repayment. In this, the interest part can be exempted under section 24 of income tax. On this, a discount of up to Rs 2 lakh is available annually.

The interesting thing is that if you are living in that house, then you can claim only up to 2 lakhs, but if you have given it on rent, you can take a discount on the interest as much as you want, there is no upper limit. But keep in mind that the rent you are getting will come under the purview of income from house property, on which you will have to pay tax. You start getting this exemption from the year the construction is over.

3. Tax exemption on interest before construction

This question comes to the mind of many people that if we took a home loan today, but the construction of the property is completed after 3 or 4 years from today, then will we not get a deduction on the interest paid on the loan in the meantime. Because the deduction under section 24 will be available from the year in which the construction is completed. So the answer is that you will also get tax exemption on the interest paid during the pre-construction phase, this is called pre-construction interest. Whatever interest you have paid during this period, you can claim it in five equal parts. That is, you can claim 20% every year. But this amount also cannot exceed Rs 2 lakh per annum, even if the existing interest is added to it.

At every turn of buying a house, you get an opportunity for tax exemption. You can also claim the registration of the house and the stamp duty paid under section 80C, on which you can get a tax exemption of up to Rs 1.5 lakh. But it can be claimed in the same year in which both these expenses are incurred, after that you cannot claim it.

5. Additional exemption under section 80EE

Apart from this, you can also take an additional exemption of Rs 50,000 under Section 80EE of Income Tax. But it has some conditions. The first condition is that the maximum loan against property should be 35 lakhs or less, and the total value of the property should not exceed 50 lakhs. This loan should have been sanctioned between 1st April 2016 to 31st March 2017. This should be your first house, before this, you should not have any other house. 80EE has been relaunched by the government, before this, it was introduced for two years in FY 2013-14 and FY 2014-15.

6. Additional tax exemption under section 80EEA

For affordable housing, the government has extended the additional interest exemption of Rs 1.5 lakh for one year on 1 February 2021. Now you can take this exemption till 31 March 2022. This exemption will be on top of the tax exemption of Rs 2 lakh available under section 24 (b). That is, you can save a total tax of Rs 3.5 lakh on interest.

But there are some conditions for this also. The first condition is that the value of the property should not exceed Rs 45 lakh. The second condition is that the home loan should be sanctioned between 1st April 2019 to 31st March 2020. The third condition, it should be the first property of the home buyer. Also, the home buyer should not be getting an exemption under 80EE.