Taking a home loan can help you save tax| With Automated Income Tax Preparation Excel Based Software All in One for the All Government & Non-Government Employees for F.Y.2021-22

 Taking a home loan can help you save tax| The repayment of a Home Loan comprises 2 components:

1. Repayment of Principal and

2. Repayment of Interest

As the repayment comprises of two different components, the tax benefit on a home loan is governed by different sections of the Income Tax Act. Following are the benefits available on loan taken on House Property which can be claimed as deductions in the Income Tax Return: 

1. Deduction on Principal Repayment (U/s 80C): The amount paid as Repayment of Principal of Home Loan taken by an Individual/HUF is allowed as deduction u/s 80C. The maximum deduction allowed u/s 80C is Rs. 1,50,000. This deduction is available on a payment basis. But to claim this deduction, the house property should not be sold within 5 years of possession. Otherwise, the deduction claimed earlier will be added back to the total income in the year of sale. 

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2. Deduction for Stamp Duty and Registration Charges (u/s 80C): A deduction for stamp duty and registration charges paid on the purchase of house property can also be claimed u/s 80C but within the overall limit of Rs. 1,50,000. It can be claimed only in the year in which these expenses are incurred.

 

3. Deduction of interest on Home loan. As per Sec 24(B), the maximum deduction for Interest payable on the Loan is Rs. 2,00,000 where the loan has been taken on or after 01-04-1999 for the Purchase or Construction of a self-occupied property and the property has been acquired or constructed within 5 years from the year in which the loan was taken. The maximum tax deduction allowed u/s 24 of interest on the loan on a self-occupied property is Rs. 30,000 where the loan was taken before 01-04-1999 or the loan was taken for repair, renewal or reconstruction. There is no maximum limit in case the house property for which the Home Loan has been taken is not self-occupied and the taxpayer can take a deduction of the whole interest amount.

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4. Additional deduction of interest u/s 80EEA: Additional deduction of interest on home loans taken from any financial institution is available to individuals up to a maximum limit of Rs. 1,50,000 provided the following conditions are satisfied:

The stamp value of the property does not exceed Rs. 45 lacs.

The loan must have been sanctioned between 1st April 2019 to 31st    March 2021.

On the date of sanction of loan, the individual does not own any other residential house property. 

5. Additional deduction of interest u/s 80EE: 

Things to Remember

Section 80EE came into effect from the financial year 2013-14. It was available for only 2 years, FY 2013-14 and FY 2014-15. The deduction allowed earlier was limited to a maximum of Rs 1 lakh in total and was available for only 2 financial years.

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However, this section has been reintroduced, effective F.Y 2016-17 (A.Y 2017-18). Now the deduction is allowed for up to Rs. 50,000 per year until the loan is repaid. Additional deduction of interest on home loans taken from any financial institution is available to individuals up to a maximum limit of Rs. 50,000 provided Additional deduction of interest on home loan taken from any financial institution is available to individuals up to a maximum limit of Rs. 50,000 provided the following conditions are satisfied:

The value of residential house property does not exceed fifty lakh rupees.

The loan must have been sanctioned between 1st April 2016 to 31st March 2017.

The amount of loan sanctioned for acquisition of the residential house property does not exceed thirty-five lakh rupees.

On the date of sanction of loan, the individual does not own any other residential house property.

Summary

Section	Nature	Maximum Deduction	Conditions
24	Interest	Rs. 2,00,000	Construction must be completed within 5 years from the end of FY in which loan was taken.
80C	Principal	Rs. 1,50,000	Property should not be sold within 5 years of possession.
80C	Stamp Duty	Rs. 1,50,000	The claim is allowed in the year of expense incurred.
80EE	Interest	Rs. 50,000	Property Value should not exceed Rs. 50 lakhs and the loan amount should not exceed Rs. 35 lakhs.
80EEA	Interest	Rs. 1,50,000	The stamp value of a property should not exceed Rs. 45 lakhs and deduction u/s 80EE must not be claimed.

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# Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10 E for the F.Y.2021-22

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Investments Qualifying for deduction under section 80C as per budget 2019, With Automated 50 Employees Master of Form 16 Part B for F.Y. 2019-20

• Investments Qualifying for deduction under section 80C Max Rs. 1.5 Lakh
• i. Provident Fund (PF) & Voluntary Provident Fund (VPF):
• ii. Public Provident Fund (PPF):
• iii. Life Insurance Premiums:
• iv. Equity Linked Savings Scheme (ELSS):
• v. Home Loan Principal Repayment:
• vi. Stamp Duty and Registration Charges for a home:
• vii. Sukanya Samriddhi Account :
• viii. National Savings Certificate (NSC) (VIII Issue): 
• ix. Infrastructure Bonds:
• x. Pension Funds – Section 80CCC:
• xi. 5-Yr bank fixed deposits (FDs):
• xii. Senior Citizen Savings Scheme 2004 (SCSS):
• xiii. Amount Contributed (for a fixed period of not less than 3 years) by a Central Government employee to his NPS (Tier –II) account (Applicable from the Assessment Year 2020-21):
• xiv. 5-Yr post office time deposit (POTD) scheme:
• xv. NABARD rural bonds:
• xvi. Unit linked Insurance Plan :

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How to maximize tax benefits on a joint home loan, With Automated TDS on Salary for West Bengal Govt Employees for F.Y.2017-18

Generally all of us think that taking a loan to buy a residential property is not a good idea and so, they start saving some amount from their monthly income into recurring investment or a Systematic Investment Plan (SIP) offered by mutual funds. But the financial planners recommend that for acquiring a house for self use, one should go for a housing loan and pay EMIs in place of going for recurring investment or SIP in other investment product.

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A payee can get income tax benefits through home loan under two different Sections of Income Tax Act.

1. Under Section 24– Deduction on interest on home loan for self-occupied property up to Rs 2 lakh.
2. Under Section 80C– Deduction on repayment of principal amount on home loan up to Rs 1.5 lakh. 

Tax Benefits under Section 24 and Section 80C: Mr. X is eligible to claim tax benefits under Section 80C for the principal repayment of the home loan and under Section 24 for interest components. He can claim deduction up to Rs 1.5 lakh along with all other permissible instruments like, life insurance premium, PPF, ELSS, NSC etc under Section 80 C and up to Rs 2 lakh under Section 24 B.

Total deduction will be Rs 3.5 lakh and if Mr. X is in the highest income tax slab, he will get a income tax benefit of Rs 1,05,000.

Income Tax Benefits on Joint Home Loan: One can avail income tax benefit on home loan up to Rs 1.5 lakh under Section 80C and 2 lakh under Section 24. But if you go for a joint home loan along with your spouse in the ratio of 50: 50, then both of you can claim these benefits separately. So the combined limit will be Rs 3 lakh under Section 80C and 4 lakh under Section 24. This can reduce your overall cost of loan for the family considerably.

Total deduction will be Rs 7 lakh and if both spouses are in the highest income tax slab, they will get a income tax benefit of Rs 210000/- which is just double compared to an individual home loan, although this provision may vary from person to person.

Before going for a joint home loan, you should mutually work out your ownership share if you wish to optimize the income tax benefit. That is, if you and your spouse own the house jointly in the ratio of 50:50, both can claim deductions in equal proportion. Therefore, if your income tax slabs are different, you need to work out your ownership share in a manner that the spouse in the higher income tax bracket owns a bigger share.

Please note that it is essential to be co-owners to be eligible for income tax benefits. The co-ownership share also plays a role in determining your deductions.

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