Buying a home is one of the major
decisions of one's life and almost everybody 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 loan 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.
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