Home Loan
The Union Budget 2025 will be introduced in a few days with several measures aimed at easing the financial burden on taxpayers, with particular emphasis on making housing more affordable. If you are a homebuyer or already have a Home Loan, you can take advantage of various tax benefits to reduce your tax liability and enhance your savings. Here's a comprehensive guide to maximising tax savings on your Home Loan.
Home Loans provide significant tax benefits under the Income Tax Act of 1961. Here's how:
You can claim a deduction of up to â¹2,00,000 annually on the interest paid for a self-occupied property. If the property is rented out, there's no upper limit, but the total loss under the head of "house property" is capped at â¹2,00,000 for a financial year.
The principal amount repaid on your Home Loan qualifies for deduction under Section 80C up to â¹1,50,000. This includes payments made towards stamp duty and registration charges.
If you're a first-time homebuyer, you can claim an additional deduction of up to â¹1,50,000 on the interest paid, provided the loan was sanctioned between April 1, 2019, and March 31, 2025, and the value of the property does not exceed â¹45 lakh.
Budget 2024 had further simplified tax benefits for homebuyers. Here are a few key points that were last year's budget highlights.
Here are some smart strategies to fully leverage the tax benefits of a housing loan:
Taking a joint Home Loan with your spouse or a family member allows each borrower to claim tax benefits individually. For example, both borrowers can separately claim deductions under Section 24 and Section 80C, effectively doubling the tax benefits.
The Equated Monthly Installment (EMI) for a Home Loan comprises principal and interest components. During the initial years, the interest component is higher, which means you can claim a larger deduction under Section 24. Use this to your advantage by planning your tax-saving investments accordingly.
Selecting a shorter loan tenure can help you repay the principal faster, enabling you to claim higher deductions under Section 80C earlier in the loan cycle.
Partial prepayment of a Home Loan reduces the principal outstanding, thereby lowering the interest burden. This can help you save more on taxes while reducing your overall financial liability.
If you're a first-time buyer, opting for affordable housing ensures you qualify for additional benefits under Section 80EEA, giving you a significant tax advantage.
When it comes to managing a Home Loan efficiently, partnering with a trusted financial institution is key. Leading banks, such as ICICI Bank, offer a range of services and tools to help borrowers optimize their loans. For instance:
Let's take an example to understand how you can save taxes on your Home Loan:
Total Tax Savings: â¹5,00,000 annually (depending on your taxable income and applicable tax slab).
This example highlights how proper planning and utilisation of tax provisions can lead to substantial savings.
While enjoying Home Loan tax benefit, keep the following in mind:
Budget 2024 continues to support homebuyers with lucrative tax benefits on housing loans. Whether you're purchasing your first home or planning to invest in real estate, understanding these tax provisions can significantly reduce your financial burden. The upcoming Budget 2025 is expected to ease out some more taxation benefits.
By partnering with a reliable financial institution like ICICI Bank, you can access tools, guidance, and personalised loan options that help you optimise both your home-buying experience and tax savings. Take advantage of these benefits today to turn your dream home into a reality while securing your financial future.
