Is Home Loan a better tax-saving option ?

Home loans are exempted under the income tax act 80C for the purchase of the flat, and loans are taken to purchase the flat. The tax benefit can be taken up to Rs.2 lakh beyond the tax slab of Rs.2.5 lakh. The borrower can avail of tax benefits for multiple years as the loans continue for a longer duration. Buying a house is the best decision for the tax benefit as the benefits can be availed for multiple years until the borrower continues to repay loans. Other types of saving schemes for tax benefits include investment in an insurance policy, car loans, investment in stocks or mutual funds, etc. But the investment in home loans is the best option for accumulated amounts for multiple years; the borrower saves a huge sum. The maximum duration for which tax benefit can be taken is 30 years if the home loan is taken for the longest span. The property as an asset can be sold at any given point if the loans are repaid on time. The borrower can claim tax benefits on the principal and also the interest amount on the loans.

Availing home loans is most beneficial as the tax exemption can be taken on the loans, and also, over the years, when the borrower repays the loans, the value of the property increases. Most of the time, a flat buyer can expect a handsome return on investment. The growth in the property prices is assured in the case of housing; while the same is not the case with the stocks were depending on the market conditions, the value may also decline. In very rare instances, the property’s value may decline due to recession in the markets; otherwise, the prices go on increasing on a continuous basis. Over ten years, a borrower, on average, can expect 100 returns on the investment. At least the chances of the property prices sliding down is almost nil over the years. The home loans if taken jointly, and if both the joint applicants are taking contributing, then in that case, the dual tax benefit can be taken by the borrowers. If two persons in a family are working, then, in that case, it is better than the joint loans can be taken, and tax benefit on the contribution can also be taken jointly.

The tax benefits can be taken in the following ways:

• Section 80C:

Under this scheme, the borrower can take the tax benefit on the principal amount being repaid to the lender. The maximum tax benefit which can be availed is Rs.1.50 lakh. The borrower should take care that the tax benefit under income tax 80C is applicable only on the fully constructed homes and wherein the occupancy certificate is obtained.

• Section 24B:

Section 24B is applicable for the home loan borrowers upon the interest repayment of the homes. The loans amount can be exempted up to Rs.2 lakh for the interest repayment of the loans. The government of India has given higher tax exemption on the interest repayment compared to the repayment of the principal amount. The home loan can be taken for multiple purposes like construction of a new home, home extension loans, purchase of a new flat, or renovation of the exterior part of the house. If the property is not constructed within five years from the date the loan is taken, then, in that case, the exemption is given for Rs.30,000 instead of Rs.2 lakh.

• Section 80EE:

This type of benefit is for the buyers who purchase a flat for the first time. This section provides a benefit of Rs.50,000 beyond the exemption limit of Rs.2 lakh under section 24B and Rs. 2 lakh under 80C. This benefit under section 80EE can only be taken for the flats costing under Rs.50 lakh, and the loan amount taken is below Rs.35 lakh.

There are various benefits under the income tax act 80C, 80EE & 24B that the borrowers can avail themselves of. Also, the anticipated rate of returns is high in the case of the property. For an old building also the borrower can get the benefit of the redevelopment of the property; thus, the benefit is huge in case of the investment in the property. The property owner enjoys tax benefits on the loans taken and enjoys permanent ownership of the property which is being purchased. The chances of the property prices falling are very less, and thus it is always beneficial to invest in property for investment purposes.