Tax Benefits for Homeowners
Owning a home in India comes with several tax benefits that can significantly reduce the financial burden on homeowners. The Indian Income Tax Act provides various deductions and exemptions to encourage homeownership and alleviate the costs associated with home loans and property maintenance.
Interest on Home Loan (Section 24(b))
Homeowners can claim a deduction on the interest paid on home loans up to INR 2 lakh per annum for a self-occupied property. If the property is rented out, the entire interest paid can be deducted from the rental income.
Principal Repayment (Section 80C)
The principal repayment of a home loan is eligible for deduction under Section 80C up to INR 1.5 lakh per annum. This deduction includes other eligible investments like PPF, NSC, and life insurance premiums.
Stamp Duty and Registration Charges (Section 80C)
The stamp duty and registration charges paid during the property purchase are also eligible for deduction under Section 80C, subject to the overall limit of INR 1.5 lakh.
Additional Deduction (Section 80EEA)
First-time homebuyers can avail of an additional deduction of up to INR 1.5 lakh on the interest paid on home loans under Section 80EEA, provided the loan is sanctioned between April 1, 2019, and March 31, 2022, and the property value does not exceed INR 45 lakh.
Tax Rules for Residential Rental Income in India
Rental income from residential property is taxable under the head "Income from House Property". The gross annual value (GAV) of the property, which is the higher of the actual rent received or the reasonable expected rent, is considered for taxation.
Deductions on Rental Income:
- Standard Deduction (Section 24(a)): A standard deduction of 30% of the GAV is allowed for maintenance and repairs, irrespective of the actual expenditure.
- Interest on Home Loan: The interest paid on a home loan for the rented property can be deducted without any limit.
Taxable Rental Income Calculation:
Taxable Rental Income = GAV - Standard Deduction - Interest on Home Loan.
These tax benefits and rules make homeownership and property investment more financially manageable for individuals in India.
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