Under Section, 80C Indians can avail tax exemption up to Rs.1.5 lakh per annum. There are various segments where Section 80C is applicable. Among such benefits, the home loan tax benefit is one of them.
What is Section 80C?
Section 80C of the Income Tax Act, 1961 enables any individual borrower and HUFs to claim tax exemption of up to the limit mentioned earlier. This tax exemption is claimed from the gross principal of their specified investment from their taxable income.
From the perspective of home loan tax benefits, opting for a joint home loan is beneficial. As per the law, every individual can claim up to Rs.1.5 lakh. Hence, with two co-borrowers, the total tax exemption reaches up to Rs.3 lakh from the total taxable income.
Individuals opting for a joint home should also know the tax benefits on a joint home loan before opting for one.
Benefits of opting for a joint home loan –
There are a few benefits of availing of a joint home loan. These are –
● Higher loan eligibility – One of the key benefits of applying for a joint home loan is that borrowers can avail of a higher credit amount.
● Reduced repayment burden – As both the applicants are employed and equally paying the debt, the burden of repayment decreases. Hence, the chance of default also lowers.
● Special interest rates for women co-owners – Having women co-owner for a joint home loan is beneficial as there are special interest rates set for such applicants.
Few Key Factors to Consider Before Opting for a Joint Home Loan –
There are a few factors a borrower must consider before you opt for a joint home loan and applying for tax exemption under Section 80C.
These are –
● Co-owner of the property – In order to claim home loan tax benefits, the applicants have to be co-owners of the residential property.
● Co-applicant of the loan – To avail tax exemption up-to Rs.3 lakh the co-owners have to be co-applicants of the loan.
● Completely constructed property – residential property of borrowers should not be under construction. An individual can opt for a home loan on a completely constructed property.
Other Factors to Keep in Mind Before Opting for a Home Loan –
● Research on loan options – NBFCs and HFCs offers different home loan interest rates and features. Hence, knowing about the rates beforehand helps to acquire the best-suited offer as per the needs of the borrower.
● Suitable EMI – The EMI is divided between the interest the borrower has to pay and the principal amount of the loan. A borrower can calculate the EMI with the help of an online EMI calculator provided by every financial institution.
● Repayment tenor – A borrower can either avail a longer tenor and pay less EMIs or a short tenor and save on interest. A borrower should opt for a suitable tenor upon their repayment capability.
There are various subsections of Section 80C. All of these sections are devised to exempt tax.
For home loan tax benefits, there are two other important Sections that complement the process of Section 80C of the Income Tax Act. These Sections are 24(b) and 80EEA.
What is Section 24(b)?
Section 24(b) allows any borrower to claim deductions on the interest paid on a home loan. The exemptions are limited to Rs.2 lakh annually.
What is Section 80EEA?
To acquire a home loan easily the Union Budget for the Financial Year 2019-2020 has issued Section 80EEA. Under this Section, an individual can claim tax exemption of up to Rs.1.5 lakh on the home loan interest paid over and above Section 24(b).
This section is only applicable to home loans availed under affordable housing schemes, like PMAY. HFCs such as Bajaj Housing Finance Limited offer such loans with a competitive rate of interest.
The Government of India has issued various schemes to simplify the process of obtaining a home loan. An individual should have a clear idea of the tax exemptions and their benefits before opting for a housing loan.