Buying a house is one of the most significant investments you’ll make in your lifetime, and with a home loan, it becomes more affordable to achieve your dream of homeownership. However, there are several factors you need to consider when researching home loans, including income tax benefits.
Home loans not only help you secure a place to call ‘home,’ but they also offer several tax benefits. If you’re a first-time homebuyer, you may not be aware of the tax benefits you’re entitled to receive from your home loan. Luckily, income tax calculators can help you calculate tax deductions and benefits on your home loan.
Here’s everything you need to know about income tax calculators for home loans, including housing loans, tax benefits on home loans, and how to calculate tax benefits using a home loan tax benefit calculator.
What are Income Tax Benefits for Home Loans?
The government of India encourages homeownership by offering tax benefits on housing loans to taxpayers. Taxpayers can claim tax deductions on the principal and interest amount of their home loan under Section 80C and Section 24(b) of the Income Tax Act, 1961.
Section 80C Deduction: Under Section 80C, taxpayers can claim tax deductions up to Rs. 1,50,000 from the gross total income. The deduction can be claimed on the principal amount of the home loan. Additionally, you can also claim deductions on other investments such as life insurance, Public Provident Fund (PPF), National Savings Certificate (NSC), Equity Linked Savings Scheme (ELSS), and more under this section. The maximum limit for tax-saving investments under Section 80C is Rs. 1.5 lakh per year.
Section 24(b) Deduction: Under Section 24(b), taxpayers can claim tax deductions on the interest amount paid on the home loan up to Rs. 2 lakhs per year for a self-occupied property. For a rented or let-out property, there’s no upper limit on tax deductions for the interest amount.
What is a Home Loan Tax Benefit Calculator?
A home loan tax benefit calculator is a tool that helps you calculate the tax benefits you can claim on your home loan. The calculator allows you to input specific details related to your home loan such as the principal amount, interest rate, and years of the loan tenure, among other information, and calculates the deductions and benefits for you.
Using a home loan tax benefit calculator can help you get an idea of the total tax benefit you can claim before you apply for a home loan. It can also help you plan your finances better by helping you estimate your monthly EMI and the tax savings you could be eligible for.
How to Calculate Tax Benefits Using a Home Loan Tax Benefit Calculator?
Using a home loan tax benefit calculator is relatively easy. Here are the steps you need to follow:
1. Enter Your Principal Amount: Enter the principal amount of your home loan. This is the amount you plan on borrowing to purchase your home.
2. Enter the Interest Rate and Tenure: Enter the interest rate of your home loan and the tenure in years. The longer the tenure, the higher the interest rate would be.
3. Mention Your Gross Annual Income: Along with calculating your mortgage payments on your home loan tax benefit calculator, it also requires inputting your gross annual income.
4. Enter Prepayments and Other Deductions: You also need to mention if you made any prepayments on your home loan. If you’ve made prepayments, the calculator will take that into account while calculating your tax benefits.
5. Calculate Your Tax Benefits: After inputting all of the information, click the Calculate button, and the calculator will display the total tax benefits you’re eligible to claim under Sections 80C and 24(b).
Final Thoughts
Getting a home loan can be a complicated process, but it’s worth it when you consider the tax benefits that come with it. Whether you’re a first-time homebuyer or an experienced homeowner, using an income tax calculator for home loans can help you determine your eligibility for tax benefits and plan your finances accordingly.
Most banks and financial institutions offer home loan tax benefit calculators on their websites. Keep in mind that while these calculators can give you an estimate of your tax savings, they do not provide definite tax calculations, and you should always consult a financial expert before making any crucial financial decisions.
