Tax rebate is available according to the Income Tax Act of India for the home loan borrowers. The maximum limit of this rebate is 1.5 lakhs per financial year.
You can can gain tax benefit on the principal and interest components of a loan if you borrow it to purchase a home as per the Income Tax Act 1961. These benefits are available under Section 24(b) to assesses who have taken a loan to buy real estate property for personal use. The interest on borrowed capital is deductible up to the limit of Rs 1.5 lakhs. Capital, borrowed on or after April 1, 1999 to acquire or construct a residential property is applicable for tax benefit. To avail the benefit, the acquisition/construction should be completed within 3 years from the end of the financial year in which loan amount was borrowed.
All the banks in home loan segment certify that the interest is payable on the amount advanced for acquisition or construction of the house, or as refinance of the principle amount outstanding under any previous loan. If conditions stated are not met, interest on borrowed capital can be deductible up to Rs 30,000.
The maximum permissible tax deduction for a financial year for the original home loan plus for any additional loans taken is Rs 1.5 lakhs. If your current deduction on an existing loan is less than Rs 1.5 lakhs, you can claim further benefits from an additional loan keeping in mind that the upper limit of Rs 1.5 lakhs in a financial year. It should be remembered the tax benefits under Section 24 and deductions under Section 80C of the Income Tax Act can be claimed only if the payment is made. when a person fails to make EMI payments, he is debarred to claim tax benefits on them.
Under the Income Tax Act of India, Tax rebate is applicable only to the person who has borrowed the home loan. The deduction can be claimed on the interest on a fresh loan can be claimed. Apart from purchase of home, The interest on a loan, taken for repairs, renewals or renovation, also qualifies for the tax deduction. When the husband and wife are both taxpayers with independent income sources, They can get tax deductions on the same home loan. In such circumstance, the tax benefits is shared to the extent of the amount of loan taken in their individual names.