Home loans have helped several people across the country realize their dream of purchasing a house. Since purchasing a ready-to-move-in house can be an expensive affair, a lot of people consider buying an under-construction property. By opting for an under-construction property, buyers can also avail tax benefits on their home loan. However, most home buyers barely know about home loan tax benefits that are associated with their housing Loan. The tax rebates on housing loan can help the borrowers save a large amount of money in the long run. Therefore, after availing a home loan, it becomes esseantial to learn about the tax benefits associated with it.
Let’s have a look at home loan tax claim tips for under-construction property
- In order to understand the concept of tax benefits for the under-construction property, it is essential to understand Pre-construction Interest.
- Pre-construction Interest is applicable from the financial year of the disbursal of home loan up till the preceding year when construction of the property is rendered complete. The interest paid during this period is known as pre-construction Interest.
- When a home loan is availed for an under-construction property, the borrower is entitled to claim deduction on the pre-construction interest, over 5 equal installments, in addition to the actual deduction on the interest under Section 24 of the income tax act.
- If the deduction on interest is claimed for the home loan on a property in which the borrower intends to stay, then the maximum deduction is of Rs. 2 lakh on Pre-Construction Interest + Actual Interest, in any given financial year.
- To claim Home Loan Tax Benefits on an under-construction property, the borrower should look for the ‘Deductions’ section at the time of filing the income tax returns, wherein, claims can be made for deductions under Section 80 C, Section 24 as and under Section 80 EE.
- To support the claim, borrowers must present their bank statements and other relevant documents. Additionally, the borrower may be asked to submit few or all of the below-mentioned documents:
- Proof of ownership of property
- Proof of date of purchase of the property
- Certificate of completion of property’s construction
- Loan agreement on the name of the borrower
- Loan Certificate
Since under-construction properties are comparatively cheaper, the amount required to purchase them would be relatively low. Therefore, the EMI payable on the loan amount would also be lesser. As the EMI on the home loan is quite reasonable, borrowers can also consider increasing their monthly installments to reduce the loan tenure. You can use a home loan EMI calculator to calculate EMI. This will help them save more on the total interest paid.
Now that you are well aware of various income tax benefits on home loan, ensure that you make the most of it while repaying your home loan. You can also avail tax benefits for the stamp duty and registration fee on the property.
With leading financial institutions, you can avail home loans at attractive interest rates. Make sure to compare various loan offers provided to you by different financial institutions. This will allow you to home loan that best suits your needs. Moreover, you should also review the lending institution carefully before making the final decision. Flexible repayment option, instant approval and quick disbursal of the loan amount are some of the major advantages of availing a home loan with a reputed lender. Moreover, you also get the opportunity to customize your home loan according to your requirements. While availing a home loan, do not forget to read the terms and conditions of the loan agreement carefully before signing it. This will help you avoid any inconvenience in the later stage.