Last year, it was the ideal time for everyone who was looking to buy a home of their own. Factors such as stagnant prices of real estate, rate cuts, and new affordable project launches coalesced together. This created a market which was amicable to homeowners.
This year is a win-win situation for people. Developers rolled out affordable projects. The government is also offering incentives so that every Indian can have their own home by 2022. Although there are discounts and offers, availing the incentives may not be that easy. It is imperative that you be aware of all the regulations about processing fees and tax deductions to streamline your process.
Claim Tax Benefit on EMI on the Payable Interest even when you have Missed a Payment:
Contrary to the deduction of principal repayment of a Home Loan or property taxes, the deduction of interest on an accrual basis. If you’ve taken a loan from the best Home Loan lender but missed a few EMIs, you’ll still be eligible to claim tax deductions.
It’s important to mention that you must retain all the documents and evidence. These can be shown to the tax authorities if they enquire about your deductions.
The Processing Fee is Tax Deductible:
Most taxpayers in India aren’t aware that charges related to loans are eligible for tax deductions. According to the legal code, these charges are regarded as interest. Therefore, you can claim deductions on the same.
Under Section 2(28A) of the Income Tax Act, there is a clear indication of the relation between processing fees and tax deductions. This processing fee includes service charges and other fees for the loan amount.
Claim Pre-construction Period Interest up to 5 years:
You’re eligible to claim pre-construction period interest once the construction is complete. After you’ve received possession, then you can claim the interest amount. The law allows deduction on the payable interest during the pre-construction period. The deduction of this interest can be availed over a span of 5 years. This begins from the year of possession.
Ineligibility for Tax Breaks When you are a Co-borrower:
You are not eligible to claim a tax break on a Joint Home Loan Lender even if you are paying the EMI from your pocket. Until you are the legal owner of the property, you cannot claim any breaks. For this, you shall have to be the co-owner of the property as well as applicant for the Joint Home Loan Lender. That way, you can be eligible to reap tax benefits.
Home Loans from Relatives and Friends are Eligible for Tax Benefits:
You can claim tax deduction under Section 24 of the Income Tax Act. This is for repayment of interest on the Home Loans you have taken from the best Home Loan lender. This is the money that you’ll be using for the construction or purchase of a real estate.
You are also free to claim tax deduction for the money borrowed from your friends and relatives. This is when you borrow for reconstruction and repairs of the property. It doesn’t have to be from a specific bank or financial institution.
You can receive tax deductions if you can show authorities about where you’ve used all the money and if it’s related to the property. That shows them that you’ve not been superfluous with it, giving them greater confidence in you.