There are a number of people who prefer home loans or mortgages for house purchasing; you will also easily find lots of examples in our surroundings of individuals had taken home loans. Along with another couple of reasons, one such great reason is the benefits of Income Tax that motivates people to opt for housing loan. The article will explain that how you can escape from Income Tax with the help of home loans.
Everyone wants to have their own home or apartment and mostly young individuals are currently making purchases however, many of them are fulfilling their expensive desires by taking mortgages are commonly known as home loans. The acquisition of home loans is not only giving you monetary assessment in the purchase of your dream house but on the other hand are giving you relief from paying Income Tax for several years until you pay off the entire amount of loan. You can understand the advantages of home loan once you get an understanding of EMI or equated Monthly Installments
EMI 0r Equated Monthly Installments
Home loan once you receive then you are liable to pay it within a specified period for which the entire loan is divided into some equal installments that you have to pay monthly, are known as EMI or Equated Monthly Installments. The amount of EMI is part of the principal amount of the loan and part of the interest rate that is charged on a loan. Initially the EMI is comprised of big amount of interest rate and a bit of principal amount that later on changes their proportions and at the end the ratio of interest in EMI become ignorant.
The response of Income TAX to principal repayment
According to section 80C, if your invested amount is about 1 Lakh then you are free from tax payment. Many individual think that Section 80C Act is only deducting investments in assets like Public Provident Fund (PPF), Equity Linked Saving Schemes (ELSS), life insurance etc. However, the list of these instruments also includes home Loan with a stipulation that you must have to live in that house for which you have taken a loan or in other words creating principal repayments. There are no limitations for getting these benefits in terms of the numbers of houses occupied.
The response of Income Tax to Interest Payment
Interest is also a part of EMI payments that comes under the category of “Income from house property” and Section 24 Act deducts it up to 1.5 Lakh. Because the interest in treating as a negative value and is thought an expense therefore Section 24 act consider it deductible. This advantage is also free from a stipulation concerning number of homes.
Income tax treatment for joint name homes or home loans
Joint name means when 2 or more persons collectively get access to a home loan. In such scenario both parties will get benefits of income tax on principal repayment as well as interest. Consider if party one pays about 40% of EMI and party B pay 60% then both will get income tax benefits according to their contribution to EMIs.
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Housing loans or mortgage are very helpful in order to get rid of income tax charges and penalties. They are much easy to get and to pay. You can pay them in installment according to your convenience. Some rules and regulations like EMI, interest and principle payments are applied in these loans. It is also quite benefited and suitable for dual partners of house.