Home Loan Tax Benefits on an Under-Construction Property
Home Loans can be a convenient way of purchasing a residential property. With the right financial planning, you can experience a hassle-free homeownership journey.
Home Loans not only facilitate the purchase of one's dream home but also offer tax benefits, enabling individuals to save funds. Investing in an under-construction property also provides opportunities for tax savings. Hence, it is important to understand how one can avail of tax benefits on a Home Loan for under-construction property.
Income Tax Benefit on Home Loan for Under-Construction Property
Section 80C of the Income Tax Act of 1961 makes provisions for tax relief on Home Loans availed of to buy under-construction properties. If you took a Home Loan to buy an under-construction property and are currently paying EMIs for the same, Section 80C of the Income Tax Act allows you to claim deductions of up to Rs.1.5 Lakh on payments made towards principal repayment. However, the house must be transferred to the taxpayer within 5 years of its possession.
Further, the Income Tax Act also allows borrowers to claim deductions up to a total of Rs.2 Lakh on the payments made towards interest repayment. However, Home Loan borrowers must know that they can claim this deduction only after the construction of the property has been completed. Interest paid during the pre-construction period is eligible for tax deductions in five equal instalments starting from the year of completion.
Tax Benefits on Stamp Duty Paid for the Acquisition of an Under-Construction Property
Over and above the deductions claimed on the payments made toward principal and interest repayment, one can also claim tax benefits on the stamp duty paid for the acquisition of an under-construction property. Borrowers can claim deductions up to the limit of Rs.1.5 Lakh on payments made toward stamp duty and registration charges. However, one can make this claim only after the construction on the property has been completed. In the case of joint Home Loans, both co-applicants can claim deductions separately.
Further, Section 80EEA of the Income Tax Act states that if the under-construction property bought had stamp duty charges falling under Rs.45 Lakh, the borrower can claim deductions up to a maximum of Rs.1.5 Lakh on the payment made toward interest repayments. This deduction is available over and above the limits set by Section 24(b). However, the Home Loan must have been sanctioned between 1/04/2019 and 31/03/2022.
Why Tax Savings on Home Loans Help
It is not easy to understand how tax deductions work in the case of under-construction properties. The good news is there are several income tax calculators available online these days that can help you understand how much money you can save by way of tax benefits on under-construction property.
Although Home Loan interest rates change with changes in the Repo Rate, property prices are rising at a faster rate, increasing the value of your home. Continued property value appreciation is a good thing as your investments will surely bring returns in future.
Furthermore, if you opt for floating interest rates, your costs will fall when the market interest rates are lowered.
So, if you have been planning to buy a home, now is the right time. Apply for a Home Loan today and make your dream of becoming a homeowner a reality while also saving money by way of tax benefits each year.
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