Most people take home loans as buying a house not only needs a large amount of money, but also due to the tax benefits available on payment of interests and repayments of principal amounts as well.
When you take a home loan, however, you need to compare interest rates and the terms and conditions of the loans offered by different financial institutions.
“While availing a housing loan, it is crucial to go through and compare different home loans, their offers and tax benefits,” said Mahesh Shukla, CEO & Founder, PayMe.
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Benefits of home loans
The main benefit of taking a home loan is the tax benefit, which is up to Rs 2 lakh in a financial year u/s 24 of the Income Tax Act for buying a house for self occupation. Apart from the interest, tax benefits up to Rs 1.5 lakh in a financial year u/s 80C is also available on the amount of principal repayment.
“There are several benefits of availing a housing loan; the primary one being the tax benefits involved with it. To encourage more people to purchase a house of their own, the government provides tax deduction on the principal as well as interest paid on home loan,” said Shukla.
As a person may stay in only one house, the second or subsequent houses purchased by the person are considered as acquired for putting on rent from the income tax point of view. So, the home loans taken for buying more than one house property have different tax treatment.
“While availing housing loans for a second house there are claim deductions for the entire amount of housing loan interest paid, under Section 24 B of the Income Tax Act. There are other benefits too, like no repayment charges, balance transfer facility, capital appreciation, etc,” said Shukla.
Also Read: House Building Loan: Can you claim tax deductions while constructing your house?
How to pay EMIs on time
When you take a home loan, you need to repay it on time with interest. For ease of repayment, the total repayment amount – along with interest – is divided in equated monthly installment (EMI).
“While planning to avail a housing loan, there should always be strategies to pay EMIs on time. Pre-planning to pay back the EMIs can help in deciding how much to borrow, plan the repayment schedule and also plan for pre-payments,” said Shukla.
“The primary step to go forward for a dream purchase is to plan and allocate an exact budget to decide what kind of property to build. Also, different loans from different banks and financial institutions come with different offers and tax benefits, which should be carefully scrutinised before applying for a loan,” he added.