In order to make the home loan more affordable and accessible for borrowers, the Indian Income Tax Department offers tax-saving benefits on it. This makes every housing loan borrower eligible to claim tax benefits. As per provisions under the IT Act, one can claim tax deduction for both principal and interest repayment.
To calculate how much tax exemption one can claim on home loan repayment, one can take the help of an online income tax calculator.
Steps to calculate tax benefits using an income tax calculator
The income tax calculator will take into account the borrower’s profile type, his/her gross annual income for the financial year, as well as the home loan payments and deductions that one can claim under Sections 24 and 80C.
Here are the 3 steps following which the tax benefits are calculated.
- Begin with selecting the applicable customer type, whether regular or senior citizen.
- After that, enter the principal amount, interest paid on the home loan (as per changing home loan rates in India) and the borrower’s gross annual income in their respective fields.
- At last, click on the “Calculate” option.
Doing this will automate the calculations and display the tax savings along with the income tax liability before taking the loan and post deductions.
Benefits of using an income tax calculator for calculating tax benefits
- This calculator is free and convenient to use and has a user-friendly interface.
- It relieves one from performing complex calculations manually.
- The calculations are fast and offer accurate, error-free results.
- The borrowers can get the exact amount of tax that they can save on their home loan repayment.
Tax deductions one can claim via home loan
Here is a detailed explanation of tax deductions one can claim for home loan as per various sections of the IT Act:
- Under Section 80C
The tax deduction under this section is applicable on both let-out houses and self-occupied property. Here the borrower can claim an annual tax deduction of Rs.1.5 lakh on principal repayment. The tax benefit can also be claimed on the expenses incurred on stamp duty for that particular year.
Under this section, one can claim home tax benefits for an under-construction property as well.
- Under Section 24b
As per the provisions under this section, an individual can claim annual tax benefits of up to Rs.2 lakh on the home loan interest rates payable amount.
However, this exemption is limited to the construction or acquisition of a self-occupied property; that too, it should be completed within the 5 years of the financial year in which the borrower has availed of the loan.
- Under Section 80EE
This tax exemption is only applicable for first-time home buyers, and the value of the property for which the home loan is taken should be below Rs.50 lakh. The home loan amount should be within Rs.35 lakh. Here the borrower can enjoy an additional tax benefit of up to Rs.50,000 on the interest payout as per the housing loan rates.
Tax benefits available for joint loan applicants
This is one of the premium ways of saving tax on home loans. One of the top benefits of a joint home loan is that here both the co-applicants are allowed for tax exemption in full under Section 24b and Section 80C.
However, before calculating tax benefits, it is advisable for the borrowers to calculate their home loan interests using a home loan interest rate calculator. This can also give them a fair idea about the tax savings on the home loan.
Various reputed financial institutions and NBFCs provide pre-approved offers. These offers are available for financial products like loans against property and others. Interested borrowers can check their pre-approved offers by providing their required personal details, such as their names and contact numbers.
So, the income tax calculator helps individuals in managing their financial resources by ensuring that one does not miss out on any tax benefits. Also, before opting for a home loan, it will be better to verify the process of claiming tax benefits and check one’s eligibility for the same.