Tax Benefits of Purchasing your First Home

Purchasing a home has its own share of advantages. You have full freedom to decorate it the way you want, you can setup a rocking home theatre or perfectly customize your wardrobe just the way you like. Apart from these benefits, buying your first home has some financial benefits too. It can reduce your tax outgo. The most favourable tax treatment that comes from owning a house is in the form of deductions. Girish Navnath Avhad, a well-known real estate agent, is telling about different deductions applicable to first time owners.

·         Deduction on interest – If you own one house which has been bought on a loan, you can claim deduction of up to maximum 2 lakh on the loan’s interest in every financial year. If your annual interest is lower than 2 lakh, your deduction is limited to your annual interest. You must be an owner of the property to claim this deduction and also a borrower in the loan. Having ownership in the property is a prerequisite to claiming all the tax benefits on the property.

·         Deduction on pre-construction interest – If you have taken a loan for a property which is under construction, deduction is available on interest which pertains to the financial years before the year in which the construction is completed. Sum up the entire pre-construction interest and claim it in five equal instalments. This deduction is included within the overall limit of 2 lakh that can be claimed by owner of one house that is vacant or used for residential purpose.

·         Deduction on principal repayments – In your EMI, a certain portion is paid towards interest and the remaining goes towards principal. Sum up the principal repayments from your loan repayment schedule for the year and claim that as a deduction under Section 80C. The maximum amount which can be claimed under section 80C is one lakh and fifty thousand and principal repayments are allowed within this ceiling.

·         Deduction on stamp duty and registration charges – Deduction is available on the stamp duty and registration charges as well that are paid on purchase of a property. This deduction is also covered within the overall limit of one lakh and fifty thousand. It can be claimed in the year in which these payments are actually made.

However, there are some other conditions too which must be met to claim these deductions. Making the most of these deductions can be a significant saving avenue for the common people.