The 2020 Union Budget came with a whole lot of revisions in income tax with several tax deductions and exemptions being removed if you were to choose the new income tax regime, in return for lower taxes. You do have a choice of remaining with the existing income tax return and availing the exemptions and deductions, while paying higher income tax in return.
Those with home loans used to count that as a huge tax saver due to the exemptions or deductions that were offered on the interest paid. It is important to choose lowest home loan interest rate and also if there are any new incentives offered to home loan borrowers in the new Budget that you can benefit from.
Take a look at 5 of these new incentives and changes in Home Loan
- Purchasing a residential property jointly with a spouse or other close family member is beneficial now because each of you can avail Rs.2 lakh in deduction for the interest that is paid by you, which is a lot of savings in the long run. If the property is self-occupied, and your bank is willing to split the loan not just among two, but among three people (such as if you have a working daughter or son who can shoulder the responsibilities of the loan), then each of you can still avail the Rs.2 lakh deduction each on the interest paid. If any additional interest is applicable for any property that is deemed to be let out or rented, then you get additional savings.
- It’s not just loans taken from banks for buying a residential unit that is eligible for interest component deduction. Even if you take a loan from a friend or an employer or any other private lender, it will be eligible for deduction on the interest component, provided you get a certificate from the lender for the same.
- If you have a second residential property that is self-occupied, you don’t have to add the notional rent to your taxable income. If you don’t have a tenant for it, you can keep it as self-occupied. You can do this for up to two houses. Any house after that for which there is no tenant will attract tax which is the tax calculated on the estimated market rental. This is called the ‘’deemed value’’.
- Booking an under-construction house may work out to be cheaper than booking a house or flat that is ready-to-move-in. This is because you can claim the interest paid during the period before delivery as deduction in income tax. This can be claimed from the fiscal year in which the construction was completed or from the date of possession in 5 equal instalments. For self-occupied property, the maximum that you can claim is up to Rs.2 lakh per year. Additional deduction of interest can also be claimed, explained in point#1.
- You can adjust up to Rs.2 lakh as total loss from property with any of your income sources. If the Rs.2 lakh interest cannot be set off against any income source, then you can carry it forward for up to 8 assessment years. This is only applicable for income from house property.
Now that you understand these new rules in detail, you can set about saving more tax on your home loan and residential properties.