Owning a house is one of the most significant achievements of an individual’s life. However, it is also one of the toughest, given that buying a house can cost quite a lot. The good thing is that a homebuyer can always rely on a home loan for financial support. A home loan can cover a significant part of the property cost, making it possible to buy a house. Not just this, a borrower who has taken a home loan can also get tax benefits.
According to the Income Tax Act of 1961, borrowers are eligible for tax benefits on both a home loan’s principal and interest payments. As per Section 80C of the Income Tax Act, a borrower can claim tax deductions of up to Rs 1.5 lakh for the principal component of a home loan. Section 24B states that borrowers are eligible for tax deductions of up to Rs 2 lakh for the interest component.
For borrowers looking to understand the tax benefits of their home loans, it is considered best to use a home loan tax saving calculator.
Here’s how a home loan tax benefit calculator works –
A home loan tax benefit calculator helps calculate a home loan borrower’s tax savings and net liability based on numerous factors such as gross annual income, type of profile, home loan EMI payments, and tax deductions. This calculator will also consider other factors such as the principal amount of the loan, existing monthly installments, home loan interest rate, etc.
How to use this calculator?
To use a home loan tax benefit calculator, a borrower needs to fill up specific details while using a home loan tax savings calculator. These details involve a borrower’s annual income, the home loan’s repayment tenure, the loan’s principal amount, and the home loan’s interest rate. After filling up these details, the home loan tax benefit calculator will display the tax results that a borrower would have to pay after the home loan tax deductions. It will also show the tax the borrower would have paid without the home loan’s tax benefits.
Tax benefits that borrowers can enjoy through a joint home loan
When borrowers apply for home loan plans with co-applicants (collaborative home loans), they can save more in tax payments. This is because both co-applicants claim tax deductions for principal and interest payments of the home loan. This brings the total tax deduction for the principal component to Rs 3 lakh and Rs 4 lakh for the interest component. It is also essential to know that senior citizens can get additional tax benefits on a home loan. If a senior citizen has a self-occupied property, they become eligible for tax deductions of up to Rs 2 lakh under Section 80C and Rs 3 lakh under Section 24B.