If you are a home loan borrower, you must familiarize yourself with the various rules and regulations related to home loan deduction in income tax in India. Various sections of the Income Tax Act have provisions for claiming home loan tax deductions on payments made towards the principal and interest components of the home loan. Section 80C of the Income Tax Act permits home loan tax deductions on payments made towards the repayment of the principal component of the home loan up to a maximum of Rs.1.5 Lakh per annum and Section 24b of the Act permits home loan tax deductions up to a maximum of Rs.2 Lakh on payments made towards interest repayment.
Further, one can also claim home loan tax deductions on payments made towards stamp duty and registration charges under Section 80C of the Income Tax Act. There are separate provisions for claiming additional home loan tax benefits in the case of affordable housing. Section 80EE and Section 80EEA of the Income Tax Act deals with these deductions. Borrowers who are aware of these deductions and how they work can save a considerable amount of money each year by way of home loan tax benefits available to them.
Most home loan borrowers are familiar with these various home loan deductions in income tax available to home loan borrowers. However, most people have no clarity regarding the process to claim these tax deductions. In this article, we will tell you everything you need to know about claiming these home loan tax deductions.
Documents You Will Need to Claim Home Loan Tax Deductions
To be able to avail of home loan deduction in income tax, you must submit certain documents. Here is a list of these documents that you will need to provide.
– To start with, you will need to provide ownership documents, i.e. documents that establish that you are the owner of the property. Borrowers must know that in the case of joint homes loans, they can claim tax deductions in the ratio of their share in the property. In the case of home loans taken by a couple, both a husband and wife can claim tax deductions separately under various sections of the Income Tax Act.
– You will also need to submit a copy of the home loan agreement as one can claim home loan tax deductions only if they have taken the home loan in their name.
– You will also need to avail of from your bank a certificate or document that clearly details out the total principal and interest you have paid in that given financial year.
– If you want you to claim income tax deduction on the municipal taxes paid, you must submit a municipal tax certificate as well.
In general, these are the documents you will need to submit when trying to claim home loan tax deductions. However, it’s best you talk to your CA and get their advice on what other documents you may need to submit to successfully claim home loan deduction in Income Tax. This will make the whole process a lot more smoother and quick.
Once you have all the documents ready with you, the next step is to submit these documents with your employer if you are salaried. When you do so, your employer will figure out your income tax liability for the year and adjust your TDS accordingly. This way, you won’t have to wait till the end of the year to adjust your taxes. In the case, you are a freelancer or self-employed, you will need these documents at the end of the year while filing your taxes. However, you must still collect them way before the tax filing process initiates so that you can figure out your tax liability for the year and make your investments accordingly.
Use an Income Tax Calculator to Calculate Your Taxes
Home loan borrowers must use an income tax calculator to figure out their tax obligation at the beginning of the year as well as how much taxes they can save by way of a home loan. This is crucial to ensure they are making other investments as well to maximize tax savings. Income tax calculators are quite easily available online. However, if you can’t find one online, simply go to the website of the Income Tax Department of India and use the one they already have. Income tax calculators require borrowers to enter a lot of different information. So, it’s best to keep all the documents and information you may need while using the calculator ready with you to experience a smooth process.
Home loans offer several benefits and one of the benefits is that they allow borrowers to save a considerable amount of money in taxes each year. So, if you have a home loan, familiarize yourself with various home loan tax deductions and make sure you are availing of the maximum benefits available to you.