Many people dream of having a house. A house which they can call as their dream house. But this dream house can be expensive. Especially if you are purchasing a house in a metropolitan city as these cities provide you with all the facilities and this makes affording a house in such cities expensive.
Overall, the cost of houses these days have touched the sky. And spending your savings to buy a house would not be considered ideal. Thinking of borrowing some funds from your friends and relatives if you are not having enough savings would not be a good idea. And spending all your savings on a house purchase may drown you in debt. Instead, you can opt for home loans in order to finance your house.
Opting for a home loan can make house financing easy. By borrowing a home loan you don’t have to compromise on your dream house. Many-a-times it happens that people have to compromise on the house just because it fits their budget even though they don’t like it. But having a home loan can help you avoid such a compromise.
Usually, interest rates charged on a home loan differ from bank to bank. Some banks charge you with a high rate of interest whereas some charge you with the low interest rate on the same amount. The bank can either charge you a high-interest rate or a low interest depending on your loan amount. The interest rate also depends on the loan tenure. If you opt for a long-term loan tenure the interest charged will be low and vice versa.
Moreover, a home loan can also save you from taxation. Hence, it’s important that you use your home loans effectively in order to save some tax.
Suppose you want to buy a property worth INR 55 Lakhs and this property is financed with the help of home loans for 85% of the property value. But the Section 24 and Section 80C which you may have heard about are unclear to you. And these acts have confused you about how to proceed with the taxation. So here is an answer to all your questions related to taxation.
How to Save Taxes on your Home Loan?
Now, if you have decided on purchasing a house worth INR 55 lakh by financing it with a loan then here you need to pay a home loan EMI of about INR 42,000. It’s usually seen that at the start of the loan period the interest factor is high. So it’s suggested to split the amount into two factors: interest and the principle. So as the interest will be high in the start whereas at the end of the loan tenure the principal will be high. Thus your EMI will be divided into two. The interest at the start will be INR 30,000 approx. whereas the principal at the end will be around INR 12,000 approx. per month. Thus, here you can claim of about INR 1, 44,000 on your repayment per year under the Section 80C.
One can also claim upon the stamp duties and the registration charges under Section 80C. It’s, therefore, important that you purchase the property during the time of January to March as you can be eligible for the full tax deduction on the registration charges and the stamp duties. As March is the end of the financial year you can make the most of your taxation. But in case you sell the property before the completion of five years then you won’t be able to take benefit of the taxation. This is as one can only benefit the taxation under the Section 80C after the completion of five years.
Now this money saved from taxation can a great reserve of savings. This can help you with various small expenses relating to dining, simple home décor, parties and so on. Because certainly, these little moments do matter. And you must take the time to treat and take care of yourself.
So make sure you have a proper plan in place to ensure better tax savings on your home loan.