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Buying your first home? Grab these tax advantages
First-time home buyer in India? Unlock tax benefits that reduce your Loan burden and save you lakhs over time. Here is how it works!
Key takeaways
- First-time homebuyers in India can tap into significant tax savings through deductions on both Home Loan Interest (Section 24) and principal repayment (Section 80C).
- You can also claim benefits on stamp duty, registration, and even subsidies under PMAY. Joint Loans offer double the advantage.
- These benefits can lighten your Loan burden and save you lakhs over time – making that dream home far more affordable than you think.
Let’s face it – buying your first home comes with excitement and financial anxiety. Those monthly repayments can look intimidating on paper. Also, the down payment might make your savings account weep. But here is the plot twist: the Indian tax system has your back when you are house hunting.
Yes, the same taxman who takes a chunk of your salary also gives some sweet discounts when you buy a house. Ironic, right? The government wants you to buy new homes. There is a significant economic benefit in a consistent construction activity that creates demand for construction materials and economic activity. The RBI statistics will tell you that banks lend more than Rs 2.5 lakh crore to home borrowers yearly.
Why should you care about tax benefits?
Buying a home is probably your biggest financial commitment, but tax benefits can significantly lighten that load. Think of tax benefits as a discount coupon on your dream home – why wouldn’t you use it?
What is startling is how many first-time buyers leave money on the table because they don’t know these benefits exist. Many new homeowners focus so much on finding the perfect property and negotiating the purchase that tax planning takes a backseat. That is like paying full price when there is a sale going on!
These Tax Benefits can effectively reduce your Loan burden by 15-20% over time, making that dream home more reasonable than what you initially calculated. To take advantage of most tax benefits, you need to file your tax returns under the old tax regime. Remember, you must choose the old tax regime for yourself while filing your returns, as the new one is the default one.
The two big Tax-Saving superpowers for Home Buyers
A deduction on Home Loan interest (Section 24)
How it works
You can claim up to ₹2 lakh per year as a deduction on the interest paid on your Home Loan.
Real-talk example
If your EMI is ₹30,000 per month and ₹20,000 of that is interest, you are looking at a tax-free payment worth ₹2lakh annually. For someone in the 30% tax bracket, that is a direct saving of ₹60,000 per year!
Pro tip
Even under-construction properties qualify, but the deduction can only be claimed after construction is completed (in five equal instalments)
Deduction on Principal Repayment (Section 80C)
How it works
Up to ₹1.5 lakh per year deduction on the principal amount repaid.
Fun twist
This is the same section where your PPF and insurance premiums live – so now your home Loan gets a seat at the tax-saving table! Just remember this ₹1.5 lakh limit is shared among all your 80C investments.
Bonus
This deduction applies from the first year, even if your property is under construction.
Bonus perks you didn’t know about
| Benefit | Details | Potential savings |
|---|---|---|
| Stamp Duty and Registration | Deductible under Section 80C (Within the ₹1.5 lakh limit) | Up to ₹45,000 for someone in the 30% tax bracket |
| Joint loan benefits | Co-borrowers can each claim deductions separately | Potentially double your family’s tax savings |
| PMAY subsidy | Credit-linked subsidy of up to ₹2.67 lakh for first-time buyers in certain income brackets | Direct deduction in Loan amount |
| Additional interest deduction | Extra ₹50,000 for loans sanctioned between April 2019-March 2022 with a value of up to ₹45 lakh | Additional ₹15,000 yearly for those in the 30% bracket |
Tax Benefits- Common myths busted
1- Myth: “Only rich people get Tax Benefits.”
Truth: Benefits apply to all homebuyers with a Loan, regardless of your income level. In fact, middle-income groups often benefit more proportionally.
2- Myth: “You need to occupy the house to claim benefits.”
Truth: While self-occupied properties get the full benefit, even rented-out properties qualify for unlimited interest deduction (though the principal benefit has conditions).
3- Myth: “I can claim benefits only after getting possession.”
Truth: Principal repayment benefits start immediately, while interest benefits can be acclaimed post-completion.
A quick checklist to maximize tax savings
- Keep Loan interest certificates handy for filing.
- Claim both Section 24 and 80C benefits.
- Explore state-specific subsidies and schemes.
- Consult a CA if confused (better to be safe than sorry).
- For Joint Loans, ensure proper distribution of claims.
Conclusion
Buying a home is no more an expense but an investment! When you look at the bigger picture, your home Loan does double duty – building your assets while reducing your Tax Liability. That is financial efficiency at its best! Over a 20-year Loan term, these benefits can add up to several lakhs in savings.
Remember: A smart homebuyer doesn’t just compare interest rates – they also calculate their post-tax cost of ownership!
Disclaimer: This article is for information purposes only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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