Loans are supposed for the ones who cannot afford to pay for the houses or education right away. Is it so? In the present time, even the affluent people are showing interests in the home loans, not because of the affordability but because of the tax benefits. Taking a home loan for making the biggest purchase of the life is becoming more and more common these days. Between the two options of using the savings and taking a home loan, many house seekers are going down the second lane. Let us see why the home loan is becoming preferred option for a considerate number of people these days.
1. Financial benefits
The home loan EMI is consisting of two payments; Interest and principal. The section 24 of Income Tax Act states that the deduction on the interest payment is possible while purchase, building, repairing or remodelling the property. Thus, while buying a home, you can claim the tax benefits on the interest payments and within a financial year, you can get relaxation on mentioned costs too. It is also possible to take the benefits on the processing fee at the time of loan enrolment and on the prepayment penalty on the closure of loan prematurely. The deductions on the self-residing property can be up to 2 lakh while for the rent out properties, there is no upper limit.
You also get the deductions on the principal repayment in a financial year and the benefits availed can be up to 1.5 lakh. For the year when the property was purchased, the deductions on stamp duty and registration fee can be clubbed. The relaxation can be availed only in the case the property is self-occupied and not let out. If the owner sells the property within 5 years of purchase, all the deductions are reversed. Read more about saving on the taxes while selling the house. If the property has been jointly owned by two people, both of them get the tax benefits.
2. Credit Score benefits
Home loans also help you financially by consolidating your credit history. These home loans are long term loans and over the period of time, they add to the credit score of the loaner. Those people who take the home loans are supposed to be more financially stable looking at the credit score. The Credit Information Bureau of India Limited evaluates the potential of an individual for taking a home loan based on this financial discipline of that person.
3. Establishing the reliability
When you take the home loan, the bank goes through your background check. It also evaluates the property you are buying for the market prices. The bankâ€™s thorough evaluation process can help you find whether or not you have made the correct decision. Also, the bank checks the authenticity of the transaction papers and you can be assured that everything is alright.
You need to learn a few things about the tax benefits while on the home loan. If the loan is taken from a friend or relative, you are still eligible for the tax benefits on the interest and not on the principal repayment. The person, however, would have to pay the taxes on the payments given by you. Not only buying, the tax relaxation can also be claimed on the renovation. The relaxation is not offered on the purchase of land or plot. The benefits remain intact even when you switch your loan from one bank to another.
If you have any more queries related to the benefits of the home loan; give us a call, we can assist you. You can also mail us and we will reach out.