Home loan is considered by many of us as the biggest liability of our lives. This is primarily because it takes away anywhere between 25-50% of our income in EMI.
However, the government offers some relief in the form of tax rebates that can be availed by any one opting for a home loan.
From in.finance.yahoo.com:
Tax Rebates and Extent of Tax Deduction
Home loan payment consists of two parts, principal component and interest component. Tax rebate is possible on both of them currently. The tax rebate is possible on 1.5 lakhs of interest as per section 24(b). The principal gets tax rebate on maximum of 1 lakh under section 80C. Most of us claim PPF, PF, insurance, ELSS and few more (as applicable to individual cases) under 80C. If the total amount claimed is less than 1L, we can add only that part of principal for tax rebate which caps the claim at 1L.
So for example, if X claims 70,000 under 80C with PF and insurance, X can only claim another 30,000 for the principal that he pays on home loan.
There are a few conditions to be satisfied in order to claim this rebate:
1. The loan should have been taken after 1st April, 1999.
2. The possession must be within 3 years from the year in which loan was borrowed.
If any of the above conditions are not met, the claim is only Rs. 30,000.
By observing these tips, you can now make the most out of your home loan.
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