If you are a home loan borrower, you might be aware that you are eligible for certain tax benefits on the loan. 2017 budget has brought a bundle of benefits to the taxpayers. There is a misconception that tax benefits can be claimed by the first time home buyers. If you are one among them who already bought your first house and waiting to buy a second home, this article is for you to help you look at the rules listed to receive missed benefits.
Tax Reliefs- 2017 Often Missed By Tax Payers
Section-24 to claim the tax benefit even if you miss an EMI
The income tax act section 24 says that you will stand eligible to claim the tax benefit on the interest paid on the house loan EMI even if you miss to pay EMI as long as interest liability exists. It is always advisable to hold a copy of interest certificate issued by the lender which specifies the amount of loan and interest dues on to answer questioning of the tax department.
Principal payment tax benefits to be reversed in case of sale before 5 years
Capital gains on the home loan can now be claimed with the holding period of24 months. If the sale of house happens within the 5years of purchase tax benefit you claimed gets reversed. The deduction will be back to the income of the taxpayer in the year which property is sold. The repayment structure of the home loan consists more of interest and lower component of principal so, you will losing little of your tax deduction if the sale happens within 5 years of taking a home loan.
Co-borrowers and co-owners are eligible for tax break
You will be eligible to the tax benefit of the home loan only when you are either co-borrower or co-owner of home loan. You cannot expect to claim tax benefit for paying EMI of the loan if you are paying EMI for the property owned by parents. However, if you and your spouse are joint owners of the property, you can claim the tax benefits both the interest and principal separately.
Pre-construction loan up to 5 years
Interest paid on borrowing home loan the construction of the house is eligible for tax deduction up to five years after the completion of the house which means you can start claiming the tax on the interest paid for the construction after receiving the completion certificate. There is a cap of 2 lakhs on the tax deduction if the construction is self-occupied. If the property let out there is no limit.
Processing fee and other charges are tax deductible
The lesser known fact is that both processing fee and prepayment charges are tax deductible. As for the tax law, these charges are considered as interest and can be claimed as a tax deduction.
Money borrowed from friends and relatives are eligible for tax deduction
If you have borrowed money from relatives for the owning a house, interest paid on the amount is eligible for tax deduction. The tax deduction can be claimed for the money borrowed for repairs and reconstruction of property.