Each year the tax-saving season experiences its peak time during the last quarter of the financial year, with all taxpayers looking to minimize their tax outgo by availing numerous tax deductions. However, for those taxpayers who have recently bought their first house by availing SBI home loan, following the below mentioned tax-saving tips would assist in reducing their overall tax liability:
Avoid sale or transfer of the house property before 5 years from possession–While claiming a tax deduction on principal repayment of SBI home loan, and borrowers need to ensure that they don’t sell or transfer the house property before the completion of 5 years from the end of the financial year in which home possession was obtained. If you do so, the tax benefit claimed under section 80C would be reversed by treating it as your income and levying the tax in accordance with the assessee’s tax bracket. This aspect makes it important to also keep your SBI home loan documents safely and handy with you when claiming tax benefits. Post-purchase of your house property, make sure you do not transfer or sell it at least before the expiry of 5 years in order to continue availing the tax benefit of up to Rs 1.5 lakhs in each financial year.
Claim deduction on charges such as stamp duty and registration fees-Most home loan borrowers are unaware of tax deduction available with respect to charges such as stamp duty, registration fee and other expenses, which are directly linked to the transfer of house property to the assessee (and mentioned in the SBI home loan documents handed over at the time of home loan disbursal). All such charges are eligible for tax claim under section 80C, capped at ₹ 1.5 lakh maximum limit in the financial year. While claiming this deduction, borrowers must remember that such expenses can be claimed as deductions only in the same year in which they have incurred.
Ensure you claim pre-construction period’s interest within 5 years-Availing a home loan to purchase an under-construction house is a common practice amongst home buyers. Although the possession of the property would be received at a later date post completion of construction, the home loan repayment starts much before obtaining possession. In such cases, the interest repayment during the pre-construction period of the SBI home loan is eligible to be claimed as a tax deduction up to 5 years, in five equal instalments starting from the year of receiving the possession or completion of construction. However, since both post and pre-construction periods’ interest repayment are eligible for tax claim, the total claim amount would be capped at an overall maximum limit of Rs 2 lakh per financial year, under section 24b.
Make sure you are both co-owner and co-borrower to avail joint tax benefits-Apart from enhancing the applicant’s home loan eligibility. A joint home loan also assists in availing higher tax benefits, subject to certain prerequisites. While opting for a joint SBI home loan, the co-borrowers need to necessarily be the property’s co-owners as well in order to avail separate tax deductions post the completion of the property’s construction. Merely being the co-borrower and not co-owner would deprive him/her of the eligible tax benefits on principal and interest repayment of up to Rs 1.5 lakh and Rs 2 lakhs, respectively. However, this interest deduction of up to Rs 2 lakhs would be provided only if the property’s construction is completed within 5 years from the end of the financial year in which the loan was taken. Also, remember that the maximum cap of Rs 2 lakh on interest repayment in a financial year holds true only for self-occupied property, and no such cap exists for let out property’s interest repayment under section 24b.
Avail additional and extended benefit of Section 80EEA
Earlier in 2019, the Budget had provided a major impetus to the housing industry by announcing another deduction of Rs 1.5 lakh on the interest payment done on home loans taken between the period of 1st April 2019 and 31st March 2020. Then later, Budget 2020 had further elongated the period of this benefit till 31.03.2021. Now in this year’s budget 2021, the government has again further extended the benefit of this tax deduction for home loans availed till 31.03.2022. One has to be a first time home buyer to avail of this benefit, and the value of housing property should not exceed Rs 45 lakh. The value of your home property and loan amount availed is also mentioned in your SBI home loan documents for convenience and keeping a record.
Be aware of tax benefits on the purchase of a second home.
On purchasing a second house property by availing SBI home loan, a homebuyer can avail of the tax benefit on interest repayment under Section 24b of the Income-tax act. But remember that the total amount of deduction that can be claimed after factoring in both the self-occupied properties cannot exceed the total limit of Rs 2 lakh available under Section 24b.
In the financial year 2019-20 onwards, as per the Interim Budget 2019 announcement for those who had to keep two house properties, the notional rent on the second self-occupied house has been waived off. This move allowed homeowners to claim nil annual value in respect of any two houses, declared as self-occupied, instead of one such house as provided prior to FY 2019-20.
Avail higher tax benefits in case of joint home loan, especially with women co-borrower
Those looking to purchase a house property jointly with their spouse and availing a joint home loan for the same can avail of higher income tax benefits. Both the primary home loan applicant as well as the co-applicant(s) can independently avail these available tax benefits as per their contribution toward repayments, hence resulting in availing of higher tax benefits. Make sure the SBI home loan documents are complete and in order when taking the home loan, as this helps in claiming tax benefits and other formalities.
In addition to this, while there are no separate tax benefits for women home buyers or co-applicants, keep in mind that women home buyers applying for a home loan to purchase the house property can get lower interest rates. Many lenders offer concessions in home loan interest rates, of usually up to 5 bps, to female applicants of home loans. Hence, looping in a woman co-applicant to your joint home loan application can lead to lowering your interest cost.