Tax Rebates with Home Loans

The Income Tax Act of India has defined a provision of tax rebate for everyone who borrow home loans. The maximum limit of this rebate is 1.5 lakhs per financial year.These benefits are covered in section(24B) of the act for who has taken loan to buy property for their personal use.


The interest on borrowed capital is deductible up to the limit of Rs. 1.5 lakhs per annum. However, only that capital which has been borrowed, on or before April 1, 1999, to construct or acquire a residential property is applicable for the special tax benefit. There is an additional clause which asks for the completion of acquisition or construction of the residential property with in 3 years of borrowing of that loan. Only if this condition is met, the benefits can be availed.


Also, as specified by the banks that the interest for home loans are payable on the amount advanced for acquisition or construction of the house, or as refinance of the principal amount outstanding under any previous loan. If these conditions are not met, then interest on borrowed capital can be deductible up to only Rs. 30,000.


Also, the tax benefits under the sections 24 and 80C of the Income Tax Act hold under the sole condition that the payment has been made. If a person fails to pay even a single EMI, he is not only debarred to claim the tax benefits on them, but it becomes more difficult for him while borrowing money in the future.


The most important point to understand is that the tax rebate is applicable only to the person who has borrowed the home loan, i.e. under whose name the home loan has been borrowed. This has been specified in the Income Tax Act of India. However, apart from the purchase of home, the interest on any loan, taken for repairs, renewals or renovation of the house also qualifies for a tax deduction. Also, it is possible to get a joint tax deduction on a home loan. When the husband and wife are both taxpayers with independent income sources, they can get tax deductions on the same home loan if they both signatories for the home loan. In such a circumstance, there is a proportional distribution of the tax benefits, i.e., tax benefits are shared to the extent of the amount of loan taken in their individual names.

Hence, the Income Tax Act of India has made it easier for people to give tax rebates by investing in their own house. Hence, eliminating all their worries.