Most homebuyers turn to a housing loan for financing the construction and purchase of their dream house. In view of this, the government has drafted several guidelines under the Income Tax Act, Section 80C. This allows tax deductions such that homebuyers can save sufficiently on the interest. Here are several of the benefits of Section 80C and others that individuals can reap.
Benefits of Section 80c on Home Loan
According to Section 80C, homebuyers can claim tax benefits of up to Rs.1.5 lakh on the principal amount. This allows them to save sumptuously during credit repayment.
However, there are several prerequisites that borrowers must fulfil to stand eligible for the credit. These include:
- Borrowers can only claim these deductions on ready-to-move-in buildings. So, if the house is in the under-construction stage, individuals will not get approval for their tax-deduction claims.
- Home-buyers claiming an exemption under this Section cannot sell their house within five years of possession. Otherwise the benefit will get reversed, and they will have to pay a tax on their income from the sale.
- Individuals are also eligible for a deduction of up to Rs.5 lakh per year for their second home loan. However, in this case, too, borrowers cannot sell their house within 5 years of taking possession.
Furthermore, there are several other Sections of the Income Tax Act that allow home loan tax benefits.
Other Income Tax Sections Offering Tax Benefits on Home Loan
Some other Income Tax Sections offering exemptions on housing loans are as follows:
- Section 80EE
According to this Section of the Income Tax Act, first-time homebuyers can receive additional deductions of up to Rs.50,000 on the interest of the credit that they are paying. However, the borrowing amount should be within Rs.35 lakh and the cost of the house must be below Rs. 50 lakh. Only then can a homebuyer stand eligible for these deductions.
- Section 24
Under this Section, borrowers can avail a tax deduction of up to Rs. 2 lakh on the interest during credit repayment. Nonetheless, to stand eligible for this tax deduction, borrowers must ensure that the home construction is completed within a period of 5 years. However, if the construction duration exceeds this time frame, loan seekers will be eligible to claim an exemption of only up to Rs.30,000 on their credit interest.
Moreover, on purchasing a second home, and completing its construction within 3 years, borrowers stand a chance of getting additional deductions. Also, there is no upper limit to the tax exemption or construction completion deadline if a home-buyer is planning to put their property on rent.
Viewing these tax deductions, home-buyers can go for a home loan to meet their extensive expenses during construction or purchase of a house. However, before proceeding with the application, it becomes essential to check the eligibility criteria for a housing loan to avoid rejection.
Eligibility Criteria for a Home Loan
Home-buyers should fulfil the following home loan eligibility criteria to get instant approval for their application:
- For salaried individuals
- Age should be between 23 years and 62 years.
- Must be a citizen of India
- Should have a minimum of 3 years of work experience
- For self-employed individuals
- Age should be between 25 years and 70 years.
- Must be a citizen of India
- Should have a minimum of 5 years of business vintage
Once an individual fulfils the eligibility criteria, they can follow some hassle-free steps to apply for a home loan.
Steps to Apply for a Housing Loan
Potential borrowers can follow the steps below to apply for a home loan:
Step 1: Navigate to the official website of a financial institution.
Step 2: Move to the ‘Home Loan’ page.
Step 3: Click the ‘Apply Now’ button.
Step 4: Fill in the application form with accurate details.
Step 5: Enter the necessary loan amount.
Step 6: Upload the required documents.
Step 7: Verify the details entered and submit the application form.
Furthermore, it would be prudent for applicants to keep the necessary documents ready beforehand to ensure that there are no errors during filling out the application form.
Documents Required to Apply for a Housing Loan
Below are some of the crucial documents required during application for a home loan:
- Identity proof documents like PAN card, Aadhaar card, Voter ID card, etc.
- Address proof documents like ration cards, passbooks, and utility bills.
- Valid educational certificates for self-employed individuals.
- Business proof documents for self-employed individuals.
- Last 3 months’ salary slips for salaried individuals.
- Property-related documents like tile deed, allotment letter and property tax receipts.
- Bank account statements, ITRs and P and L statements of the last 6 months.
There are several reputed financial institutions that provide pre-approved offers to existing customers. These are available on several products like a home loan and loan against property that hastens the credit application process. Interested individuals can check their pre-approved offers from the official website by entering their name and contact details.
Individuals looking forward to purchasing a house should claim tax deductions under Section 80C of the Income Tax Act. This ensures maximum savings and eases credit repayment due to the reduced EMIs. However, it becomes mandatory that homebuyers check if they fulfil the associated conditions before raising a claim.
