Home loan tax benefits you need to know about

In Budget 2016, relief was provided to employees who were not granted HRA by employer by increasing the maximum limit of deduction.

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The first-home buyers availing home loans in 2016-17 are allowed to take additional tax benefit of up to Rs 50,000 under Section 80EE of the Income Tax Act, 1961.
While doing your tax planning for this financial year, i.e., 2018-19, don't forget to claim some of the tax benefits introduced in the Budget 2016. Home loan borrowers should remember to claim these additional benefits if they qualify. These tax benefits proposed in Budget 2016 are still applicable as on date.

Further, those who do not get House Rent Allowance (HRA) should also check as to whether they can claim the increased tax break given to them in Budget 2016.

1. Extra deduction on home loan

The first-home buyers availing home loans in 2016-17 were allowed to take additional tax benefit of up to Rs 50,000 under Section 80EE of the Income Tax Act, 1961. Currently a home loan borrower paying interest on the loan can claim deduction of interest so paid from his/her gross total income up to a maximum of Rs 2 lakh per annum under Section 24. However, this deduction can be claimed only if the property for which the loan is taken is self occupied. The deduction of Rs 50,000 introduced in Budget 2016 is over and above this limit of Rs 2 lakh.

But, there were some conditions attached to it, as listed below:
*The additional deduction with respect to interest on loan taken will be applicable only for residential self occupied house property.
*It's only for first-time home buyers.
*The maximum additional benefit is capped at Rs 50,000 a year.
*The value of the house for which loan is taken cannot exceed Rs 50 lakh.
*The loan amount cannot exceed Rs 35 lakh.
*The loan has to be sanctioned between April 1, 2016 and March 31, 2017.

Although this tax benefit is not available for new home loan takers in 2017-18 or 2018-2019, if you have already availed, you can claim this deduction until you have fully repaid the loan.

2. Increase in time period for claiming deduction of interest
In a home loan, the interest payable up to Rs 2 lakh gets deducted from gross total income while computing income from self-occupied house property. This, however, applies only in cases where the acquisition or construction of the house is completed within three years from the end of the financial year in which the loan was taken.

In Budget 2016, there was a relaxation in the time period and the tax benefit would hold even if the acquisition or construction is completed within five years from the end of the financial year in which the capital was borrowed.

For all those getting house possession this year (2018-19), this extension gives a relief. With builders not completing projects on time and delivery of homes getting delayed, this change in tax rules will benefit several home loan borrowers and they will not suffer (due to inability to avail tax benefit) because of builder's default in handling over the homes in time.
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3. Benefit for those not getting HRA: Rationalisation of the limit of deduction allowed with respect to rents paid
Section 80GG provides for a deduction of any expenditure incurred by an individual in excess of 10 per cent of his total income towards rent payment with respect to any furnished or unfurnished accommodation occupied by him as his residence if he is not granted HRA by his employer, to the extent that such excess expenditure does not exceed Rs 2,000 per month or 25 per cent of his total income for the year, whichever is less. In Budget 2016, relief was provided to such employees. The maximum limit of deduction was increased from the existing Rs 2,000 per month to Rs 5,000 per month.
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