Sections for Tax Benefit on Home LoanHome loan borrowers enjoy dual tax benefits under

the Income Tax Act. One, on the Principal Amount

repaid and the second, on the Interest paid. These

benefits are also available for loans taken for

additions and alterations of the house and

Commercial property.

Tax Rebate IT Act SectionsThe tax rules relating to home loan rebates are governed under the Income Tax Act, 1961 and its amendments under the following Sections:-

(a) Section 80 C

Applicable to Principal Amount Repayment.

(b) Section 24

Applicable to Interest Payment.

(c) Section 80 EE

Additional Amount of Rs 50,000 Interest Payment (effective from 01 April 2016 onwards ).

IMPORTANTThere are, however, variations in Tax benefits rules for the first time house buyers and the second/multiple house buyers. These benefits not only reduce your tax outgo but also help you in managing your cash flows better.

First Time House Buyers and the House is Self Occupied(a) Under Section 80 C

Stamp Duty and Registration Charges

(b) Under Section 24

Pre-EMI Interest

(c) Under Section 80 EENote: You can claim the above mentioned exemptions only when you are in possession of your house Or house has been completed.

Tax benefits for Joint Home Loan Borrowers

In the case of home loans taken on joint names, both the borrowers are treated as separate entities for the purpose of tax benefits. They enjoy above mentioned benefits independently but both the individuals need to repay the loan.

First House Buyers but the

House is Rented Out/Lying

Vacant

Second Home Buyers (One Self Occupied and the Other Rented Out)

For the self occupied house, the non taxable amount will be restricted to the limits mentioned above but for the second property entire interest amount can be claimed as deduction, without any capping under Section 24 (b). But the benefit of Section 80 C will not be applicable for the second house. The rent earned will be taxable.

Second Home Buyer (Both Are Rented Out)

In cases where both the houses are rented

out, then full deductions on Interest paid

on both home loans is allowed against such

incomes. Rental income earned from both

the houses will be taxable.

Proofs Required for Availing Tax‘Certificate of Interest’ from the banks/NBFCs stating your

Principal amount repaid and the Interest amount paid over the

period of complete Financial Year. However, in order to ensure

that your employer does not deduct Tax at Source (TDS), you

need to obtain a copy of the ‘Provisional Certificate of Interest’ at

the beginning of the Financial Year and hand it over to your

employer.

Conclusion

Loans are a great liability on any borrower as its massive and the repayment

tenure is long. It should be taken based on your financial needs. But it gives the

borrower a great advantage in saving taxes under the Income Tax Act . Even

loans taken for commercial/industrial property, additions, altercations also enjoy

the tax benefits. Above all, loans give an opportunity to the borrowers to create

wealth with borrowed money.