Loans
•04 min read
Home loans often signify the realisation of a dream, yet they come with significant financial commitments. Learn all the essential steps to secure attractive tax benefits on your home loan and make your financial journey smoother. Discover how to declare a home loan in income tax step-by-step to unlock valuable tax deductions. This guide breaks down the process, explaining how you can secure attractive tax benefits while ensuring a hassle‐free filing experience. By following a step-by-step approach, you will learn about the various tax deductions available, how to use online tools to calculate your savings, and the impact of the new tax regime on home loan benefits.
One of the most popular tax benefits is the deduction available on home loan interest. Under Section 24 of the Income Tax Act, you can claim a deduction on the interest paid for a self-occupied property up to ₹2,00,000. For properties that are let out, there is no limit to the deduction you can claim on the interest. If your home is still under construction, the pre-construction interest can be divided into five equal parts. These parts are claimed in consecutive years starting from the year in which the construction was completed. Being mindful of whether your property is self-occupied or let out can help you plan your deductions better.
In addition to the interest deduction, you can also claim tax relief on the principal repayment of your home loan. The deduction limit under Section 80C is up to ₹1,50,000. This benefit is available provided that the property is not sold within five years of possession. Ensuring proper documentation of your repayment schedules is essential when you declare your home loan in your income tax documents.
For first-time homebuyers, Section 80EE offers an extra deduction of up to ₹50,000 on interest payments. Additionally, if you are investing in an affordable housing project, Section 80EEA allows for a further deduction of up to ₹1,50,000. Understanding these sections and wrapping your repayments efficiently into your tax filing can further enhance your overall tax benefit on your home loan in the broader tax planning strategy.
If a home loan is taken jointly, every co-owner can individually claim deductions on both the interest (up to ₹2,00,000) and the principal repayment (up to ₹1,50,000). This approach maximises the total amount of deduction available to the household, provided all co-owners meet the necessary criteria. Clarity on co-ownership and repayment sharing is essential in declaring a home loan in income tax correctly.
Proper documentation is the backbone of an accurate tax filing. To declare your home loan in income tax filings, ensure you have all the necessary documents ready. These include:
Loan sanction letter, interest certificate from your lender, proof of principal repayment such as bank statements, and a completion certificate if your property is under construction.
The process of filing your Income Tax Returns (ITR) is made simpler when you understand exactly where to input your home loan information. For salaried individuals, you need to submit the details of your home loan to your employer. For self-employed individuals, you must attach these documents when filing the relevant ITR form, such as ITR-1 or ITR-2.
Within the ITR form, find the section dedicated to deductions. There, you will input the details for home loan interest claimed under Section 24 and the principal repayment under Section 80C. Ensure that every figure corresponds precisely with the information reflected in your documents. Accuracy not only speeds up processing but also prevents any potential queries from the tax department.
Online income tax calculators are handy tools to help you estimate the tax savings from your home loan. By inputting inputs like your total income, details of home loan interest and principal repayment, and other savings, you can quickly see how much tax benefit you stand to receive. For instance, you can use an income tax calculator to simulate potential savings under various scenarios, ensuring that you are prepared for the tax filing process.
For individuals with substantial home loan Equated Monthly Installments (EMIs) or high amounts of deductions, the old tax regime might be the more advantageous choice. Analyzing your annual income, home loan repayment details, and the overall tax relief you can claim will help in making an informed decision. It is crucial to evaluate which regime offers greater benefits for your financial situation.
If you own more than one property, consider declaring one as self-occupied and the others as let-out. This strategic approach can help maximise your deductions on home loan interest, allowing you to extract the most benefit from your loan interest payments across properties.
Prepaying a part of your home loan can have multiple benefits. Not only does it help in reducing the total interest burden and loan tenure, but it can also optimise the deductions available under Section 80C. A higher principal repayment reduces the interest component and accelerates your journey towards loan completion.
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For couples or family members sharing a home loan, consider splitting ownership and repayment responsibilities. Each borrower can independently claim deductions, which effectively increases the overall tax benefit available to your household.
Loan sanction letter, interest certificate, proof of principal repayment, and completion certificate for under-construction properties.
Log in to the Income Tax e-filing portal, select the appropriate ITR form, and enter your home loan details under the respective deductions sections.
Yes, but only after the construction is complete; pre-construction interest is claimed in five equal installments starting from the year of completion.
Section 24 allows a deduction of up to ₹2,00,000 on home loan interest for self-occupied properties, with let-out properties enjoying an unlimited deduction.
No, the new tax regime does not permit deductions for home loan interest or principal repayment.
Filing your income tax returns with home loan details correctly can open up several opportunities for significant tax savings. By understanding the deductions available under Sections 24, 80C, 80EE, and 80EEA, and by ensuring that you have all the necessary documents, you are well equipped to navigate the process. Whether you choose the old or new tax regime, being informed about your options is key to optimising your tax benefits while managing your home loan effectively. The step-by-step approach and advanced strategies shared here can simplify your declaration process and maximise your overall financial savings. With Tata NeuMoney, earn 500 NeuCoins on your loan disbursal and turn your dream home into reality.
