Exploring tax benefits of Mortgage Loans in India
In India, Mortgage Loans are a popular financing option for purchasing or constructing property. Along with the convenience of financing property, Mortgage Loans also offer some attractive tax benefits under various sections of the Income Tax Act of 1961. Let us explore the key tax benefits available for Mortgage Loans in India:
Tax deduction on principal repayment
Under Section 80C, the principal amount you pay towards your Mortgage Loan is eligible for tax deduction. It is one of the most widely used tax benefits. You can claim a maximum reduction of around Rs. 1.5 lakh every financial year on the repayment amount.
Tax deduction on interest paid
Section 24(B) of the Income Tax Act states that you are eligible to raise a tax deduction on the interest paid on the Loan. As a Mortgage Loan borrower, this feature benefits you in the initial years when the interest portion of the EMI is higher. You can raise a maximum deduction of Rs. 2 lakh in every financial year on the interest paid on the Loan.
Stamp duty and registration charges
Under Section 80C, you can also claim deductions for charges spent on stamp duty and registration charges while purchasing a property. The deduction is part of the Rs. 1.5 lakh limit set for Section 80C. It includes principal repayment, Life Insurance premiums, and PPF contributions. This deduction can be claimed when stamp duty and registration charges are paid only for a self-occupied property.
Joint Home Loan borrowers
If you apply for a Joint Home Loan, both borrowers can claim tax benefits separately. This means that both borrowers can claim the interest deduction of Rs. 2 lakh each under Section 24(b) and the principal repayment deduction of Rs. 1.5 lakh each under Section 80C. However, it is required that they are both co-owners of the property and share the repayment.
Tax benefits on Loan Against Property
While Loan Against Property is not directly linked to property purchase or construction, the interest paid on LAP for specific purposes can also provide tax benefits. If the LAP is used for business purposes, the interest paid on a LAP is deductible as a business expense under Section 37 of the Income Tax Act.
First-time home buyers
If you apply for a Mortgage Loan for the first time, an additional tax benefit is available under Section 80EE of the Income Tax Act. This section provides a separate deduction for interest paid on Mortgage Loans. You can claim up to Rs. 50,000 per year on the interest paid. However, the Loan amount must be less than Rs. 35 lakh, and the property’s value should not exceed Rs.50 lakh.
Conclusion
Mortgage Loans in India offer substantial tax benefits. It is an exciting advantage for individuals looking to invest in property. You should consult a tax advisor or financial planner to ensure you maximise these benefits while staying compliant with tax regulations.
