For any individual, owning his or her own house is an immense achievement. However, with real estate prices being so expensive, most homebuyers are forced to rely on home loans to get the required finances. Now, a home loan can be helpful for borrowers. It can cover up to 75%-90% of the property cost. Also, a home loan includes tax benefits. As per the Income Tax Act of 1961, a borrower can get tax benefits for both the interest as well as principal components of a home loan. For the interest payments on the loan, it is possible to claim a tax deduction of Rs. 2 lakh (Section 24B). When it comes to the principal component of the loan, a borrower can get a tax deduction of Rs. 1.5 lakh (Section 80C).
Now, to get a clear understanding of the tax benefits of your home loan, it is always advisable to make use of a home loan tax saving calculator. A lot of home loan borrowers are unaware of what this calculator is. Read on to learn about this calculator and how you can calculate the tax benefits of your home loan:
How does a home loan tax benefit calculator work?
A home loan tax benefit calculator can help in calculating net liability as well as tax savings on the basis of your annual income (gross), total deductions, and EMI payments made for the repayment of your home loan. This calculator will take into account multiple factors such as the principal amount of the loan, EMI payments, annual income, deductions based on the financial year, existing tax implications, interest rate of the loan, and so on.
How does one make use of this calculator?
A home loan tax benefit calculator requires certain information to provide the tax savings that a borrower can make. This information includes the principal amount of the loan, the repayment tenure, the loan’s interest rate, and your annual income. With these details, the calculator will be able to provide the results of the tax that needs to be paid post all the deductions. It also shows the amount you would have paid without the tax deductions as well as the total amount of tax savings.
Tax benefits of a joint home loan
Those who have opted for a joint home loan can actually get much better home loan tax benefits. Since there are two co-applicants involved in this type of loan, the total tax deductions claimed under Section 80C (principal component) is Rs. 3 lakh and the tax deductions claimed under Section 24B is Rs. 4 lakh (interest component). So, when it comes to tax benefits, a joint home loan is much better as compared to an individual applying for the loan.
Lastly, do note that senior citizens get additional tax benefits on a home loan. Senior citizens with self-occupied properties can get tax deductions of up to Rs. 3 lakh under Section 24B and Rs. 2 lakh under Section 80C.
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