How Will You Manage Income Tax After Availing Home Loan?

Home loans, inherently, imply that you have your own house. It is such a joyous moment, indeed. But, it is also a start of new hassles. You could have bought it for a purpose of self-occupancy or as an investment. Either way, you will need to understand it from the perspective of income tax too. The income tax regulations vary considerably for different types of home loans. So, welcome to the world of home loans. Here is how you manage your income taxes after signing on a home loan agreement.

HRA and income tax:

The most common assumption is that once you avail a home loan, you cannot avail house rent allowance in your income tax exemption. It is typically applicable if you have bought a self-occupied property in same city area. But, buy an investment property or a commercial property. Then, you can continue to include HRA and home loan repayment in your income tax returns. That is the best part.

You can also include housing loan repayments and HRA in your income tax exemption if your property is far away from your place of work. However, do consult your accountant about the housing loan rules applicable. They vary with nature of employment, type of income, Union Budget, etc.

House loan and income tax:

Each home loan EMI includes partial repayments of principal amount and interest. So, you will need to know about the division as per the house loan agreement too. Though, you will get an income tax exemption on principal amount and interest. But the amounts of permitted tax exemption are different. In addition, these amounts can vary with each year’s financial budget.

So, finance savvy borrowers can keep an eye on income tax announcements in financial budget. This gives individual borrowers an advantage while planning year’s repayments accordingly. Then get maximum income tax exemption on the housing finance repayments.

Conclusion:

Housing finance industry is inseparably tied to income tax rules and regulations because a lot of people invest in real estate to use this exemption to their advantage. It may not be the best choice in terms of income tax exemption. But, most housing finance borrowers can continue to use this tax exemption for years.

But, home loans have a tedious process. Property purchase with housing finance is not easy in India. The home loan eligibility and the documents required are a trouble. But, properties are a potential landmine of legal hassles too. So, be smart and get all your paperwork in order before investing and borrowing funds for the same.