Jun 11, 2023Home Ally

Understanding Tax Benefits: Checklist for First-Time Homebuyers in India

by Godrej Properties Limited

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Introduction

Buying a home is a significant milestone in one's life, and it comes with several financial implications. One of the key aspects to consider as a first-time homebuyer in India is the tax benefits associated with owning a property. Understanding these tax benefits can help you make informed decisions and optimise your finances. 
 

Checklist for First-Time Homebuyers

1. Home Loan Interest Deduction

  • Familiarise yourself with Section 24 (b) of the Income Tax Act, which allows for a deduction on the interest paid on the home loan.
  • Understand the maximum deduction limit of ₹2 lakh per year for self-occupied properties. For properties that are let out, there is no upper limit on the interest deduction.
  • Keep track of the interest certificate provided by your lender to claim the deduction accurately.

2. Principal Repayment Deduction

  • Get acquainted with Section 80C of the Income Tax Act, which enables you to claim deductions on the principal repayment of the home loan.
  • Note that the maximum deduction limit under Section 80C is ₹1.5 lakh per year
  • Keep copies of the loan repayment schedule and receipts of principal repayments for claiming deductions.

3. Joint Home Loan Benefits

  • Understand the benefits of taking a joint home loan with a co-borrower, such as a spouse or family member.
  • Know that each co-borrower can claim deductions on both the interest and principal repayment, subject to the specified limits.
  • Ensure that the co-ownership of the property and the loan documents reflect the contribution of each borrower to avail of the tax benefits appropriately.

4. Pre-Construction Period Interest Deduction

  • Be aware that if you have taken a loan for an under-construction property, you can claim a deduction on the interest paid during the pre-construction period.
  • Understand that the deduction can be claimed in five equal instalments, starting from the year of completion of the construction.
  • Maintain proper documentation, including the interest certificate provided by the lender, to support your claim.

5. Stamp Duty and Registration Charges

  1. Recognise that the payment made towards stamp duty and registration charges can be claimed as a deduction under Section 80C.
  2. Keep copies of the payment receipts and the agreement for sale, as these will be necessary to substantiate your claim.

Conclusion

As a first-time homebuyer in India, understanding the tax benefits associated with homeownership is crucial. By following this checklist, you can ensure that you leverage the available tax advantages to reduce your overall tax liability and make the most of your investment. 

 

Frequently Asked Questions

1.Are tax benefits available for a second home or a property under construction? 

Ans: Yes, tax benefits are available for a second home and for a property under construction. However, there may be certain limitations and conditions that need to be considered.
 

2.Can I claim tax benefits if I have rented out my property? 

Ans: Yes, if you have rented out your property, you can claim deductions on the actual interest paid on the home loan without any upper limit. 

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