Buying a home is one of the major
decisions of one’s life and almost every body who takes a home loan
has to go to a bank or financial institution to get his home financed
Home loan prepayments: Some important points
Buying
a home is one of the major decisions of one’s life and almost every
body who takes a home loan has to go to a bank or financial
institution to get his home financed. The money involved in a home
loan is often a very big sum. Government of India has given some tax
benefits on home loans in India to decrease the burden of buying a
home in India. Here are 5 important facts about these tax benefits.
Both
interest and principal components of home loan attract tax benefits.
Persons who have taken a loan to buy a home or for construction can
claim these deductions under the section 24(b) of the Income Tax
Act.
The
deduction on interest component on home loan is available up to Rs.
1.5 lakhs if the loan was taken on or after April 1, 1999 to buy or
build a property. The purchase or construction should be completed
within three years from the end of the financial year in which the
loan was taken. In addition to it a certification from the lending
banks is needed to certify that interest is payable against the loan
advanced to buy or construct a house.
These
deductions are only available if you continue to make payments. If a
borrower fails to make EMI payments on time, he cannot claim tax
benefits on the amount supposed to have been paid.
If
a person buys a house and sells it within the same year or before
three years, he is liable to pay short term capital gains tax. But,
if the sale had taken place after three years, he is liable to pay
long term capital gains tax. Long-term capital gains are exempt from
tax if the profit amounts are invested in capital gains tax-saving
bonds as detailed under Section 54.
Only
a person who has taken a home loan can claim tax deductions. If
there are co-borrowers of the home loan, the deduction they can
claim is limited to the extent to the part of the loan they repay.
