Save Income tax with Home loan

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Taking home loan is one of the good ideas for saving income tax. There are many reasons for this. 

Home loan can reduce the taxable income by Rs 2,50,000 per financial year. This much amount is not possible with any other tax saving plans. Apart from tax benefits it could yield huge capital gains in the form of ‘land value appreciation’.

Home loan principal and interest on principal paid during a financial year can be exempted from tax. You can save Income tax on home loans under two different sections of Indian Income Tax.

1) Indian Income Tax Act 1961 – Section 24 (B)

2) Indian Income Tax Act 1961 – Section 80 (C)

Section 24 (B): Interest on borrowed capital or loan  taken for purchasing a Home, constructing a house or renovating an existing property. The max amount deductible under this act is Rs 1,50,000 per financial year.

Section 80 (C): It allows a tax deduction of up to Rs 1,00,000 on principal amount of home loan or borrowed capital repaid in a financial year. We have already discussed that maximum amount that can be exempted under 80(C) is 1,00,000. So if you have taken a home loan you need not invest in other instruments like mutual funds.

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    Mohan Bhupathiraju

    Mohan Bhupathiraju is a co-founder & editor at LastBull.com. Handled multiple projects in BFSI for few of the Forbes top 100 companies. He works in IT industry in the US. Presently working on start up Ideas in Finance & Technology niches.

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    { 5 comments… read them below or add one }

    Shoba April 29, 2009 at 7:27 am

    Sir,

    This is shoba from chennai sending this query. I would like to know, can we avail tax benefit by taking housing mortgage loan-ie home equity loan. Kindly clarify this. If so, give me the section details also.

    Reply

    Raj May 14, 2009 at 5:18 pm

    Hi Shoba, As I know there is no tax exemption for any loans against property. Since,in home equity loans you can use the money borrowed for any of your personal use. But if you take loan after April 1, 1999 to reconstruction, repairs or renewals of a house property, you will avail up to 30,000 tax exemption on interest on borrowed capital (under Section 24(b)).

    But clearly, in your case (Home equity loans), there will not be any tax excemptions.

    Please let us know if you need more info..

    Thanks,
    Raj

    Reply

    d biswanath January 25, 2010 at 4:39 am

    Sir,
    I am paying more than 3 lakhs as income tax from salary.I want to know how can I be benifited by taking homeloan during this year onward.
    regards

    Reply

    dinesh kaushik November 18, 2010 at 6:36 am

    can an amount taken as home loan from relative save income tax ?

    Reply

    P. Venkatraman April 3, 2011 at 12:59 am

    Hi,

    I have 2 home loans and I pay an EMI of 1.2 Lakhs and 6 lakhs respectively, towards the home loans. And I live in the flat against which I pay an EMI of 1.2 Lakhs.

    My query is, can the EMI of 6 lakhs can be declared and tax benefits availed under any section?

    Thanks much,

    Venkat

    Reply

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