Buying a home is a dream harbored by all of us. In earlier times, people went to great lengths in order to save up money to make this dream a reality. But today, things are different, and even youth who have a good salary can afford to buy their dream home at a young age. Gone are the days of waiting until one grows old to invest in a home. Thanks to the many home loans available in today's scenario, one can easily procure a home loan and make their dream of owning their home a reality. While getting a home loan comes with an obvious benefit of paying for your home immediately, there are also many other tax benefits on home loans that you can enjoy. We list some of the first time home buyer tax benefits for you:
- Both the interest and principal components of a home loan can bring you tax benefits. Individuals who have taken a loan to purchase their home or for the purpose of construction can claim the principal amount under section 80(c) and the interest can be claimed under 24(b).
- If an individual buys a house and decides to sell it within the same year or before a period of three years, he is liable to pay short term capital gains tax. However, if the sale has taken place after three years, one is liable to pay long term capital gains tax. This is not taxable if the profit amounts are invested in capital gains tax-saving bonds as detailed under Section 54 thus offering great first-time homebuyer tax benefits.
- One can get a deduction on interest component on home loans of up to Rs. 1.5 lakhs if the loan is taken on or after. 1st of April 1999 for the purpose of building or buying a property. This home loan tax benefit can be enjoyed if the purchase or construction is completed within three years from the end of the financial year in which the loan was procured. Apart from this, a certificate from the lending bank should be provided to certify that interest is payable against the loan taken to buy or construct a home.
- Another one of the tax benefits on a home loan is available if one continues to make payments. If an individual who has borrowed money fails to pay the EMI on time, he cannot claim the tax benefits on the amount that is supposed to have been paid.
- Lastly, only the person who has taken the home loan can enjoy the tax deductions. If there is a co-borrower for the said home loan, he or she can only claim limited benefits of the deductions that one can avail when they opt for a home loan. It is only limited to the amount that they will repay.
If you have been wondering about how much tax can be saved on home, then we hope that the above points have brought about some clarity. You could be a first time home buyer or you may have attempted to buy a property before, these are some of the benefits that you must keep in mind to make the most of your situation.