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Top Facts To Know About Home Loan And Taxes

The Government of India offers home loan tax benefits to individuals who take a loan to purchase their first house

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Home loan is a thing which is required for everyone at least once in their life to fulfill the wish of owning a house.
Many people are used to considering the home loan as a loan with the help of which we can purchase a house. Pixabay

The Government of India offers home loan tax benefits to individuals who take a loan to
purchase their first house. The aim is to provide a boost to the real estate market and encourage individuals to own homes. You can also avail tax benefit on the interest paid on all your home loans, regardless of whether it was for your first home or not. Let us take a look at the various scenarios involved:

Deduction for principal repayment
Under Section 80C of the Income Tax Act, the actual principal repaid towards your home loan can be claimed as a deduction. The deduction is available for your first home. The deduction is also applicable to a rented home when the owner is staying in a different town for work. The maximum deduction available under Section 80C is ₹1,50,000. The limit is raised to ₹2,00,000 for senior citizens.

loan, home, tax, India, purchase
The aim is to provide a boost to the real estate market and encourage individuals to own homes.

Deduction for interest paid on a home loan
Income tax benefit on home loan also includes deduction on the interest paid under Section 24 of the Income Tax Act. If the construction of the home was completed within five years of the loan disbursal, actual interest paid up to ₹2,00,000 are allowed as a deduction when calculating the taxable income for the individual. The cap is increased to ₹3,00,000 for senior citizens if the loan was for a self-occupied first home. If the construction of the home is not completed within five years, the tax exemption is allowed up to ₹30,000 only.

Additional deduction under Section 80EEA
Under Section 80EEA, an additional deduction of ₹1,50,000 can be availed if the loan was for the purchase of an affordable house under ₹40 lakh till March 2020. Again, this deduction can only be availed for a self-occupied first home.

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Additional deduction under Section 80EE
If you have taken a loan for your first home after 1st April 2016, you may be eligible for an
additional deduction of ₹50,000 under Section 80EE of the Income Tax act. You can avail this deduction if your home finance was for less than ₹35,00,000 and the value of the property was under ₹50,00,000.

Deduction for interest paid pre-construction
Deduction on home loan interest rate is only available after completion of construction or
immediately on the purchase of a fully constructed house. But the EMI payments would start as soon as the loan is disbursed. You could still claim Income tax benefit on home loan interest paid during the construction phase – you would do this after the construction has been completed. The interest paid can be claimed in equal parts for five financial years post-completion, up to a maximum of ₹2,00,000 per year. The limit includes both the interest paid in the current year and the deduction being claimed for the interest paid during the construction of the property.

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GST Council Lowers Tax on Number of Goods and Services to Spur Demand

The hotel rooms costing between Rs 1,000 and Rs 7,500 would attract 12 per cent GST

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GST, Council, Tax
Announcing the rate cuts following the GST Council meeting here, Finance Minister Nirmala Sitharaman said that hotels room with tariff of Rs 7,500 crore would now attract 18 per cent GST from 28 per cent earlier. Pixabay

Friday proved to be a big day for India Inc. After a slew of tax concessions including reduction in corporate tax from 30 per cent to 22 per cent, the GST Council has lowered tax on a number of goods and services to spur demand.

The key sectors which would benefit from GST rate cuts are hotels, gems & jewellery, defence and automobiles.

Announcing the rate cuts following the GST Council meeting here, Finance Minister Nirmala Sitharaman said that hotels room with tariff of Rs 7,500 crore would now attract 18 per cent GST from 28 per cent earlier. The hotel rooms costing between Rs 1,000 and Rs 7,500 would attract 12 per cent GST. No tax would be levied on hotel rooms with rental upto Rs 1,000.

Among other rate changes, the Council has reduced rates for cups and plates made from leaves and hides to nil. The GST on caffeinated beverages has, however, been increased from 18 per cent to 28 per cent plus additional 12 per cent cess.

GST, Council, Tax
Friday proved to be a big day for India Inc. After a slew of tax concessions including reduction in corporate tax from 30 per cent to 22 per cent, the GST Council has lowered tax. Pixabay

The Council has exempted specified defence items from GST to promote this key sector.

Among other major items, the Council has reduced compensation cess on passenger vehicles with seating capacity of 10-13 persons by 1-3 per cent, thus making them cheaper.

Railway wagons, coaches and rolling stocks would, however, now attract higher GST of 12 per cent from 5 per cent earlier.

The revised GST rates would become effective from October 1, 2019.

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In a major boost to gems and jewellery sector, the Council recommended to reduce GST on cut and polished semi-precious items to 0.25 per cent from 3 per cent now.

The two back-to-back announcements are set to boost growth and investment.

With most engines of growth stuttering and GDP declining to six-year low of 5 per cent in the April-June quarter, pressure has been mounting on the government to revive the economy. Some external factors like US-China trade war has added to the woes.

GST, Council, Tax
The key sectors which would benefit from GST rate cuts are hotels, gems & jewellery, defence and automobiles. Pixabay

In the wake of domestic and external headwinds, the Reserve Bank of India recently lowered its GDP forecast and pegged it at 6.9 per cent in 2019-20. Several rating agencies and research firms expect the growth to be in the range of 6.5-7 per cent.

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The poor show in the first quarter of the current fiscal has prompted the Modi government to take measures to boost growth and lift business sentiment. Starting August 23, Finance Minister Sitharaman has announced four set of measures to put economy on fast track. (IANS)