Tax implications of a home loan
For many people buying a home is a dream wish. For some, especially employed with huge pay packs, it is a means of saving on the taxes.
The Income Tax Act allows a person to deduct the total interest paid on the home loan from his or her taxable income, subject to a maximum of Rs 1,50,000/-. This is available only if you are staying in the house in which you took the loan. If you have rented out your house property, then the Act allows you to deduct the interest amount from the rental income from the house.
Further a home lonee is entitled to a rebate, to a maximum of 20%, with a ceiling of Rs 20,000/-. However if your gross total income exceeds Rs, 5,00,000/- then you are not entitled for a rebate. The rebate is calculated on the principal amount paid towards loan clearance.
However it should be kept in mind, the tax benefits will not accrue to an assessee, if the property is located in another state. If the property is located in another city, then the benefit on rebate will not be applicable. For a plot of land tax benefits are nil.
The maximum limits of tax benefits are per assessee. So couples, who are joint applicants/joint owners for home loans, can claim respectively, benefits up to the maximum limits