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What You Need to Know About Income Tax Calculator: Explained Simply

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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.

home loan processing fee

6 Home Loan Fees to Know About Before Taking Loan

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If you’re keen on purchasing a house, now is a good time as home loan rates are at an all-time low. Even when combined with other charges, such as home loan processing fees, these loans have become significantly less expensive due to the repo rate cuts in 2020.

  • India’s home loan market is expected to record a growth rate of 22% between the years 2021 and 2026, with affordable mortgage rates as one of the acute triggers
  • The last repo rate cut announced by the RBI brought these rates at a 7-year low, prompting a reduction in home loan rates

Repo rate is one of the external benchmarks widely adopted by lenders, bringing in the RLLR-based lending system for home loans. While this has brought in a welcoming change for prospective borrowers, one must be aware of the other fees levied by lenders to estimate the total repayment liability better and assess affordability.

6 types of charges on home loans

1.Interest rate

Interest rate is one of the most significant charges levied by a lender and covers the cost borne by financial institutions in lending money for a specific duration. The risk undertaken by a lender in extending finance is one of the primary factors that impact your home loan interest rate. 

    As the lending rate margin varies from one lender to another, one must make an interest rate comparison before sending a home loan application to a given lender. Further, you can assess your borrowing affordability with the help of a home loan calculator available online. Only provide the loan amount, tenor, and applicable interest rate to check the EMI value. Some calculators also reflect the total interest payable, allowing individuals to make an informed borrowing decision.

    Before opting for a home loan, one must also know how to choose between floating and fixed interest rates for improved repayment affordability over the tenor.

    2.Home loan processing fees

    Home loan processing fee is another mandatory charge a borrower needs to pay when availing the advance. It is charged as a fixed percentage of the total loan amount applied for and is set at a nominal rate between 1% and 2%. The charge primarily includes costs related to administrative expenses such as application examination and document verification. It also covers charges related to the printing and posting of loan statements. 

    It is smart to look for a lender providing these loan statements online to ensure that the charges are kept at a minimum. Applicants need to pay this processing fee to initiate the home loan procedure in India; only once the home loan application fee is paid does the financial institution evaluate an application.

    3.Secure fee

    Like a home loan processing fee, a security fee is also an essential charge lenders levy by providing online services. It is a one-time, non-refundable fee charged towards providing a secured online service, such as digital account maintenance and maintaining secure transactions.

    4.Penal interest

    Penal interest is a variable charge levied only in case of defaults in EMI payment or any part of the loan amount due for repayment. It is charged as a percentage of the amount defaulted on and is chargeable on a per-month basis until the borrower pays the unpaid amount. 

    With some of the best lenders, the penalty charge is kept at as low as 2% of the amount on default. It is best to make timely payment of your EMIs to eliminate the levy of penal interest on your loan.

    5.EMI bounce charges

    EMI bounce charge is another variable fee charged in case a cheque deposited towards EMI payment bounces. To avoid such charges, it is best to keep sufficient funds in your account prior to the monthly due date for hassle-free payment of your monthly home loan instalments.

    6.Prepayment fees

    Prepayment charges include foreclosure and part-prepayment costs. These fees are levied only if a borrower opts for either of the prepayment facilities. Nevertheless, they are not applicable if a home loan is obtained at a floating rate.

    Along with assessing these charges, individuals must also evaluate their eligibility with a home loan eligibility calculator and apply for an amount accordingly. 

    Conclusion

    Leading NBFCs also bring pre-approved offers to make financing hassle-free and less time-consuming. These offers are available on a range of financial products, including loans against property and home loans. You can check your pre-approved offer by providing your name and contact number.

    These NBFCs also keep charges such as home loan processing fee at a minimum, improving borrower affordability. When applying for the advance, individuals can also look for other available features, such as hassle-free balance transfer facility and top-up advance, to ensure benefit maximisation. Also, check the RBI guidelines for home loans to ensure a maximum cap on the advance and apply accordingly.