How can home loans help in tax saving Ranjeet , 05 Nov 2012

I am planning to take a loan of 15 lacks, I would like to know if I can save tax on the EMI I pay monthly

Fintotal Answer

Yes. You can save tax by paying home loan On home loans you can save tax in two ways.  1) You can reduce your taxable income by up to Rs 1 lac by claiming for principal on your home loan EMI paid in the previous year, under section 80 C of Income Tax Act. This Rs 1 lac limit is including all other 80 C benefits like PPF, ELSS, life insurance premium, etc you might like to claim on. Suppose you have invested Rs 60,000 in various 80C avenues and paid Rs 1,50,000 as principal on home loan you can claim maximum of Rs 1 lac under 80 C.  2) You can reduce taxable income for interest paid on home loan by maximum of Rs 1.5 lacs if it is a self occupied property, under section 24. In your case the interest component would be expected to be much lesser than the limit. If the property has been rented out, the entire interest paid in a year can be claimed for deduction. However if the loan was taken before 31.03.1999 only Rs 30,000 a year can be claimed for interest under this section. For elaborate reading check out Tax on Property 

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