According to the Income Tax Act of 1961, home loan borrowers can get tax benefits for both principal as well as interest components of the loan. For the principal component, the maximum tax deduction that you can claim is Rs 1.5 lakh under Section 80C. When it comes to the interest component, the maximum tax deduction that can be claimed is Rs 2 lakh, which is mentioned under Section 24B.
When it comes to figuring out the tax benefits of a housing loan, it is always advisable to make use of a home loan tax benefit calculator. Now, many people are unaware of this tool and how to use it to figure out the tax benefits that they can get for their loan. If you are not familiar with this calculator or the tax benefits of a home loan, read on.
What is a home loan tax benefit calculator?
A home loan tax benefit calculator helps calculate your tax savings as well as net liability according to your gross annual income, total deductions, as well as payments made towards the loan. Since this calculator is an online tool, it considers various factors such as your annual income, principal amount of the loan, its interest rate, the monthly instalments, any existing tax implications, the deductions based on the financial year, and so on.
How to calculate home loan tax benefits?
The easiest way of calculating tax benefits is to make use of a home loan tax saving calculator. All that the tax saving calculator needs is information regarding your annual income, principal amount of the housing loan, the tenure in which you are repaying the loan, as well as the interest rate of the loan. Once you provide these details, the tax benefit calculator will provide results for the tax you would have paid without the loan, tax to be paid after calculating the loan tax deductions, and the total tax savings made, thanks to these tax deductions.
Additional tax benefits of taking a joint home loan
If you were unaware of this, taking a joint home loan is actually a great way to save money on tax payments. Since both you and the co-applicant are claiming tax deductions under Section 80C and Section 24B, the total tax deductions claimed on principal payments is Rs 3 lakh, and Rs 4 lakh in case of interest payments. To enjoy the benefits of a joint home loan, you need to apply for home loan with a co-applicant who is also a co-owner of the property.
Also, do keep in mind that senior citizens get to enjoy even better housing loan tax benefits. As per the Income Tax Act, for self-occupied properties, senior citizens are permitted tax deductions of up to Rs 3 lakh for interest payments under Section 24B and Rs 2 lakh under Section 80C. Now that you are aware of the various tax benefits available on a home loan, make sure to take full advantage and save your money!
