Home Loan Tax Saving Tips

Six Home Loan Tax Saving Tips

Posted on Posted in Economy
If you are dreaming of a new home, 2016 is the best time. There are multiple tax benefits such as rate cuts on loans, stagnant property prices and attractive payment schemes. Here are a few tips for you to save on tax benefits on home loans.

1. Claim tax benefit on interest paid even if missed an EMI.

It is quiet common that people miss out EMIs due to various reasons. You can claim tax benefit even if you have missed out to pay an EMI. Section 24 clearly mentions the words “paid or payable” in respect of interest payment on housing loan which saves you from missed EMIs. So, you can claim as a deduction so long as the interest liability is exists. You are also advised to remember to keep all the documents safe if there comes a future audit by tax authorities. Also remember that the   repayment deduction principal under Section 80C is available on actual repayments only.

2. Tax Deductible Processing Fee

Many people may not know that charges related to their loan are eligible for tax deduction. These charges are considered as interest. So, deduction can be claimed under the Income Tax Act, Section 2(28a). The act says that the ‘interest payable in any manner in respect of any money borrowed or debt incurred (including a deposit, claim or other similar right or obligation)’. This will include all types of service fees or other charges in respect of the loan amount,”.

3. Sell before 5 years to reverse Principal Tax
You can claim back your principal tax if you sell your home with in five years of its purchase or with in five years of attaining the home loan.
4. Loans from relatives and friends
 
It is a good idea if you can borrow money from your friends or relatives as it is tax free.
5. If you are just a co-borrower.

You can also get tax exemption if you are only a co-borrower.

6. Pre-construction period interest for up to 5 years.

You can also claim for a pre-construction interest for five years once the construction is complete and home is under your possession.

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