For buyers who are seriously pursuing real estate investments or at the last step of their deal, should look at signing on the dotted line before this month ends- February 2020. While there are many benefits like you having an upper hand in negotiation and favourable pricing in a location of your choice during the present slow market, investing now can also help you make the most of tax benefit exemption on home loans.
Generally, tax exemption is calculated for a financial year. “Initiating a home loan in February 2020 will help you save taxes for the two months in that financial year too. A higher proportion of interest paid is being used up for tax savings. So if one goes for a property investment in January or February, taxes will be saved for 14 months as opposed to 12 months,” says Rajesh K M, an independent financial advisor.
Like in the case of Mohit Dobhal, who was all set to register his 3 BHK property in Kharghar post the festival of Holi in March 2020, citing it to be an auspicious time. “Although I wasn’t aware, my charted accountant rightly pointed the tax savings I would experience if I would register the property just a month before ie. in February 2020 and I followed suit. Having finalized the property and ready with an approved loan, it is beneficial to start the EMIs in the current financial year itself. Since my EMI worked out to approximately Rs 90, 000 per month predominantly accounted for by the interest component in the initial years. Even though the interest component in the beginning years works out to over Rs 8 – 9 lakh per year in my case, the tax deduction is limited to Rs 2,00,000 in a financial year, which works out to Rs.16,667 per month. However, for the first two months, being February and March 2020, that mark the end of the current financial year, entire interest component of around Rs.80,000 for each month can be claimed as deduction (as it is not exceeding Rs.2,00,000 for a single financial year). This helps in reducing my tax liability for the current year significantly,” explains Dobhal.
While people are aware of the multiple tax deductions in the form ELSS, life insurance premium, PPF, etc. under section 80C of the Income-tax, 1961, most of them are still not aware of the other investments and expenditures that are eligible for tax deductions.
“Also, not many people are conscious that there exist certain types of revenue for which your responsibility is zero and they are not added to chargeable income. On the basis of certain terms and conditions, tax aids can claimed for home loan principal and interest repayment under 80C and 24B and HRA under 10 (13A) by an individual,” says Avneesh Sood, Director Eros Group.
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Investing in January and February can help you make the most of tax benefit exemption on home loans.
If one goes for a property investment in January or February, taxes will be saved for 14 months as opposed to 12 months
With 16+ years of experience in various sectors, of which more than ten years in real estate, Anuradha Ramamirtham excels in tracking property trends and simplifying housing-related topics such as Rera, housing lottery, etc. Her diverse background includes roles at Times Property, Tech Target India, Indiantelevision.com and ITNation. Anuradha holds a PG Diploma degree in Journalism from KC College and has done BSc (IT) from SIES. In her leisure time, she enjoys singing and travelling.
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