TAX BENEFITS

    Benefits of taking a home loan for Section 24 of the Income Tax Act

    Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.

 

    When put in figures, this is quite an amount:

    Amount comes as follows

  • Assume taxable income of Rs 4 lakh, placing the assessee in the highest tax bracket.
  • Assume interest payment during the first financial year is Rs 1.60 lakh
  • Taxable income stands reduced to Rs 2.5 lakh (Rs 4 lakh - Rs 1.5 lakh being the maximum limit)
  • Total tax amounts to Rs 49,980 (tax of Rs 49,000 + surcharge of Rs 980)
  • Tax saved is Rs 45,900 (tax @30% on Rs 1.5 lakh plus 2% surcharge as the investor is in the highest tax bracket)
 

    Benefits of taking a home loan for Section 88 of the Income Tax Act

    You get a 20% rebate on repayment of principal during a financial year. Once again, over the years, the principal repayment eligible for rebate has been enhanced from Rs 10,000 to the current limit of Rs 20,000. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assesses is also considered under this amount.