Why owning a home is beneficial tax-wise?
Home Loan Tax Benefits
Joint home loan
Lighter on the pocket, a joint home loan allows you to share the EMIs with your family member, friend or any other co-borrower. In case you lighten your financial burden, even more, you can add more than two applicants to the same loan, this will also make the repayment of the loan easier.
The tax benefit on joint home loan for co-owner are:
Deduction under section 80EE and 80EEA
In the year 2016 & 2017, to increase the sale of flats and to make it easy for people to buy homes, the Indian government introduced a deduction under section 80EE. Section 80EE allows a deduction of up to Rs 50,000 for interest paid by first-time homebuyers for a loan sanctioned from a financial institution between 1 April 2016 and 31 March 2017. The government has extended the benefit for the FY 2019-20 which can be claimed until the housing loan is repaid.
Speaking of Section 80EEA, a deduction for interest payments up to Rs 1, 50,000 is available, which is over and above the deduction of Rs 2 lakh for interest payments available under Section 24 of the Income Tax Act.
Cumulatively, taxpayers can claim a total deduction of Rs 3.5 lakh for interest on a home loan, if they meet the conditions of section 80EEA.
For availing this deduction there are some eligibility criteria & conditions one has to adhere to:
Conditions concerning the carpet area of the house property. These conditions have been specified in the memorandum to the finance bill, but not mentioned in section 80EEA:
Under Section 24, homeowners can claim a deduction for interest payments up to Rs 2 lakh on their home loan, if or not the owner or his family resides in the house property.
If the homeowner has rented out the property, the entire home loan interest is allowed as a deduction.
If one can satisfy the conditions of both Section 24 and Section 80EEA, benefits under both the sections can be claimed.
It is however advised to exhaust the deductible limit under Section 24 first, which is Rs 2 lakh. Then claim the additional benefits under Section 80EEA. Therefore, this deduction is in addition to the Rs 2 lakh limit allowed under Section 24.
Deduction for stamp duty and registration
In India, a homebuyer has to pay stamp duty between 4-10% and a registration charge at 1% of the property value. Deductions are claimed on stamp duty and registration charge paid on property purchase under Section 80C of the Income Tax Act, 1961. The overall deduction limit under Section 80C ─ which offers rebate against a wide range of investments, including PF, PPF, life insurance, home loan principal etc. ─ is Rs 1.50 lakh in a year.
So, under Section 80C, a homebuyer can not only claim a rebate on his home loan principal but also on stamp duty, registration charge and other additional expenses. However, the limit stands at Rs 1.50 lakh in a year only.
Conditions apply to claim tax benefit on property stamp duty and registration charge under Section 80C
Home loan tax benefits of owning a second property
If you have bought a second property with the help of a home loan or other housing finance, you can claim a tax deduction on it too.
While deductions under Section 80C on the principal amount of the loan may not be available in the case of your second house, you can enjoy tax benefits on the interest component.
In other words, if the interest payable on the loan taken for the purchase of the second house was larger than the rent received, the remaining portion could be adjusted against your other income. However, now a limit of Rs 2 lakh has been imposed on such adjustment. The remnant portion of the interest, if any, can be carried forward for 8 successive years to be adjusted against income from house property only and under no other head.
In the case of self-occupied property, any additional income remaining after deduction of Rs 2 lakh can neither be carried forward nor adjusted against any other income.Source: HDFC
Deduction on interest paid