Here are the tax savings you get when you take a home loan to finance your property purchase.
Tax savings you get under Section 80C of the IT Act on your home loan principal
You can get a deduction of up to Rs.1.5 lakh on the principal amount of your home loan when you purchase a home that is ready to move in, be it an apartment or a stand-alone house.
Tax savings you get under Section 24 of the IT Act on your home loan interest
You can get a deduction of up to Rs.2 lakh on your home loan interest payment when you purchase a home that you plan to occupy yourself.
Tax savings first-time home buyers get under Section 80EE on home loan interest
If you are a first-time homeowner, you can get additional tax benefits on your home loan’s interest over and above the savings under Section 80C and Section 24 of the IT Act.
During one financial year, you can take advantage of tax deductions up to Rs.50,000 on your home loan’s interest.
Remember that you get this benefit, your home’s purchase price should be under Rs.50 lakh and your home loan principal must be under Rs.35 lakh.
How to save tax if you are taking a home loan as a co-borrower
Co-borrowers on home loans can also get tax deductions under both Sections 80C and 24. So, if you are a co-borrower or taking a home loan alongside a co-borrower such as your siblings, parents, spouse or other family members ensure that you and your co-borrower’s name is mentioned as a co-owner in your property papers. This will make all co-borrowers eligible for tax savings too.