Even if you get a discount on both, your tax bill can burn a hole unless you know the rules well. Here goes a list of six lesser known tax benefits.
2016 is looking to be one of the best years for home buyers. More tax benefits, rate cuts on loans, stagnant property prices, new launches in the ‘affordable’ segment with freebies and attractive payment schemes. Many of you will be looking to take advantage of these benefits and buy a house.While hunting for a house at the right price, you’ll be haggling with the bank to cut a loan deal too. Even if you get a discount on both, your tax bill can burn a hole unless you know the rules well. Here goes a list of six lesser known and often-missed tax benefits on home loans.
1. You can claim tax benefit on interest paid even if you missed an EMI. Unlike the deduction on property taxes or principal repayment of home loan, which are available on ‘paid’ basis, the deduction on interest is available on accrual basis. Meaning, even if you have missed a few EMIs during a financial year, you would still be eligible to claim deduction on the interest part of the EMI for the entire year.“Section 24 clearly mentions the words “paid or payable” in respect of interest payment on housing loan.Hence, it can be claimed as a deduction so long as the interest liability is there,” says Kuldip Kumar, partner-tax, PwC India. However, retain the documents showing the deduction so that you can substantiate if questioned by tax authorities. The principal repayment deduction under Section 80C, however, is available only on actual repayments.
2. Processing fee is tax deductible. Most taxpayers are unaware that charges related to their loan qualify for tax deduction. (more…)