How a home loan can help you optimise your tax saving

financialexpress.com:

Securing a home loan is a major financial step and it’s crucial to have a comprehensive understanding of the entire process. A home loan offers excellent tax-saving opportunities, and recent budget changes have further enhanced their attractiveness.

Firstly, there are certain criteria for availing tax deductions on a home loan in India, particularly concerning construction projects:

Loan purpose: The home loan must be utilized exclusively for acquiring or constructing a residential property. Tax deductions on interest and principal repayment apply only to the portion of the home loan amount used for the approved purpose, which includes buying or constructing a residential property. Any segment of the loan utilized for different purposes, such as renovations conducted post-possession, will not qualify for tax deductions.

Construction timeline: In the case of home loans intended for construction, there’s a timeframe for claiming the full interest deduction benefit. The construction of the house must be finalized within five years from the conclusion of the financial year in which the loan was procured.

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In India, home loans can serve as a potent means to save on taxes. Although securing a housing loan can come with costs, it also opens up avenues for multiple tax deductions that can lead to savings each year. Understanding how to maximize these benefits is crucial.

Repayment of the principal amount: The principal amount you repay through your home loan Equated Monthly Installments (EMIs) is eligible for a deduction under Section 80C of the Income Tax Act, with a maximum limit of Rs 1.5 lakh per year. However, there’s a condition: You can