Worried about your tax returns? Want a home loan but confused about its impact on your tax returns? Confused about the ideas of tax rebates?
Don’t worry! The answers to these questions lie in the Income Tax Act of India!
Tax rebate is an amount that reduces the tax to be paid by the full amount of the rebate. Tax rebates treat all taxpayers equally by giving the same amount of rebate regardless of income level.
The Income Tax Act of India has a provision of a tax rebate for all people who purchase home loans. Accordingly, the maximum limit of this rebate is 1.5 lakhs per financial year.
The Income Tax Act of 1961 states that one can gain tax benefit on the principal and interest components of a loan if she/he borrow it to purchase a home. These benefits have been discussed under Section 24 (b) of the act which assesses who has taken a loan to buy real estate property for personal use.
The interest on borrowed capital is deductible up to the limit of Rs. 1.5 lakhs per annum. However, only that capital which has been borrowed, on or before April 1, 1999, to construct or acquire a residential property is applicable for the special tax benefit. There is an additional clause which calls for the completion of acquisition or construction of the residential property within 3 years of borrowing of that loan. Only if this condition is met, the benefits can be availed.
Also, as specified by the banks that the interest for home loans are payable on the amount advanced for acquisition or construction of the house, or as refinance of the principal amount outstanding under any previous loan. If these conditions are not met, then interest on borrowed capital can be deductible up to only Rs. 30,000.