5 Key strategies to maximise your home loan tax benefits

Key Takeaways

Leverage Sections 80C and 24(b) of the Income Tax Act to optimise home loan tax benefits, especially if you have a joint home loan.
Opt for a higher EMI at the start of your loan tenure to maximise interest tax deductions on your home loan.
Amplify your home loan tax exemptions with IDFC FIRST Bank Home Loan, offering competitive rates, a seamless digital process, and flexible repayment options.

23 Oct 2024 by Team FinFIRST

5 Smart tips to maximise your home loan tax benefits

Apply Now

Rajesh had always dreamed of owning a home. After years of hard work, he finally took the plunge and purchased an apartment. As Rajesh calculated his home loan EMIs and their impact on his budget, he felt overwhelmed by managing EMIs, taxes, and other expenses. A friend advised him to investigate the tax benefits available under the Income Tax Act, and that's when Rajesh discovered the game-changing power of home loan tax benefits.

With an IDFC FIRST Bank Home Loan, Rajesh not only secured his dream home at a competitive rate but also maximised his home loan tax benefits with their expertise. Read on to learn how much tax benefits you can gain from your home loan.

6 Types of properties to choose from as a first-time home buyer

How does Economic Trends Affects Home Loan Interest Rates and Availability

How do economic trends affect home loan rates and availability?

5 Tips to optimise your income tax benefit on home loan

Here are five essential tips to help you optimise your income tax benefits on a home loan, ensuring you make the most of your investment –

Deduction on principal repayment under Section 80C

You can claim a deduction of up to ₹1.5 lakhs on the principal repayment of your home loan. It is part of the broader Section 80C benefits, including other investments like PPF, NSC, and ELSS.

To maximise this benefit, ensure that your home loan principal repayment is well documented and included in your annual tax planning.

Home loan interest tax deduction under Section 24(b)

This section provides tax benefit on the interest component of your home loan.

If you live in the property, you can claim a deduction of up to ₹2 lakhs per annum. If the property is let out, there is no upper limit, but the overall loss under the head ‘Income from House Property’ is capped at ₹2 lakhs, and the balance can be carried forward for 8 years. It is crucial to keep a record of your interest certificates issued by the lender to accurately claim the tax benefit on your home loan interest.

Tax deductions on joint home loans

Suppose you have taken a joint home loan. In that case, each co-borrower can claim a deduction on both principal repayment (under Section 80C) and interest payment (under Section 24(b)), provided they are co-owners of the property.

This means that collectively, a couple can claim up to ₹3 lakhs on principal repayment and ₹4 lakhs on interest payment, doubling the tax benefits. To claim these deductions, ensure the loan repayment is made from a joint account or each co-borrower’s account to establish their contributions.

Striking the right balance between tenure and loan amount

As your loan progresses, the interest portion of the EMI gradually decreases. Therefore, opting for a higher EMI at the start will help you maximise the tax benefit on your home loan interest.

To achieve the ideal balance between lower interest costs and higher savings, consider making partial prepayments to reduce your outstanding loan amount. Aim to bring the annual interest close to the ₹2 lakhs cap, which maximises interest savings and ensures your interest payments remain eligible for tax relief.

Additional tax benefit under Section 80EE

You can claim a deduction of up to ₹50,000 per financial year under this section. You can continue to claim this deduction until you have fully repaid the loan.

However, certain conditions apply, like being a first-time home buyer, having your home loan sanctioned between 01 April 2016 and 31 March 2017, and having a property value of less than ₹50 lakhs.

Boost your home loan benefits with IDFC FIRST Bank

IDFC FIRST Bank Home Loan is designed to provide competitive interest rates and customer-friendly terms, making it an excellent choice for maximising your tax benefits.

With features like a 100% digital process, higher eligibility amounts for salaried individuals, quick disbursal, flexible repayment options, and a dedicated support team, IDFC FIRST Bank ensures your home loan experience is smooth and hassle-free. Apply today!

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.