Buying a home is one of the biggest investments that most people make in their lifetime. However, the cost of purchasing a house can be quite high, making it difficult for some individuals to afford it. In such cases, after using a reliable Income Tax calculator taking a home loan can be a viable option. Besides providing financial assistance, home loans also offer certain income tax benefits.

Under the Income Tax Act, of 1961, homeowners can claim tax deductions on both the principal and interest components of their home loan. These tax benefits can significantly reduce the overall tax liability of the borrower. Let’s take a look at the tax benefits on home loans in detail.

Using an Income Tax Calculator

To calculate the tax benefits on your home loan, you can use an income tax calculator. These online calculators can help you determine the tax deductions applicable to your loan based on various factors like the loan amount, interest rate, and repayment tenure. This way, you can plan your finances better and ensure that you make the most of the tax benefits available to you.

Deduction on the principal amount

Homeowners can claim a deduction on the principal component of their home loan under Section 80C of the Income Tax Act. The maximum deduction allowed is up to INR. 1.5 lakh per annum. This deduction can be claimed only if the borrower has taken the loan for the purchase or construction of a residential property.

Deduction on the interest amount

Homeowners can claim a deduction on the interest component of their home loan under Section 24 of the Income Tax Act. The maximum deduction allowed is up to INR. 2 lakh per annum for a self-occupied property. For a let-out or deemed-to-be-let-out property, the entire interest amount can be claimed as a deduction. Additionally, if the property is still under construction, borrowers can claim a deduction on the pre-construction interest amount under Section 24(b) of the Income Tax Act.

To sum it up, taking a home loan not only helps you purchase a property but also offers several income tax benefits. By using an income tax calculator and understanding the various tax deductions available, you can minimize your tax liability and save more money in the long run.

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