Home Loan Guide: Maximise Your Tax Savings as a Salaried Employee

By Lodha

Almost all of us grow up with the dream of buying our own home one day. While purchasing property may seem like a capital-intensive affair, today, you can rely on various methods to reduce any financial strain while buying your dream home. A great way to buy your dream home without having to shell out the entire asking price on your own is to apply for a home loan. If you are a salaried employee, applying for a home loan is a pretty straightforward process and can allow you to arrange for a substantial chunk of the down payment. Additionally, applying for a home loan as a salaried employee can also allow you to avail of a host of tax benefits. If you want to purchase your dream home while saving on tax, here is a handy guide to the benefits available to you.

What are the Tax Benefits for Salaried Employees Applying for a Home Loan?

Salaried employees can avail of various tax benefits if they apply for a home loan in India. However, if you are a salaried employee who has taken out a home loan, it is important to file your taxes under the old regime to avail of tax-saving benefits. The benefits available to you as a salaried employee fall under the purview of the Income Tax Act 1961 and are as follows:

Section 24 (b):

Section 24 (b) of the Income Tax Act pertains to the interest payable on a home loan. According to this section, borrowers can enjoy deductions to the tune of Rs 2 lakhs from their taxable income every year for the interest paid on a home loan. However, this deduction will only apply to you if the construction of the property you have purchased is complete within five years of availing the loan. You must also either occupy the property yourself or rent it out.

Section 80C:

Section 80C of the Income Tax Act is concerned with the repayment of the principal amount of a home loan. According to this section, you can avail deductions up to Rs 1.5 lakhs every year on the principal amount repaid on a home loan. Do note that this deduction is subject to the overall limit of the section, which includes other investments and expenses such as Public Provident Fund and Employee Provident Fund.

Joint Home Loans:

As a salaried employee, you can also apply for a home loan jointly with your spouse or other individual as a co-owner. If you do apply for a joint home loan, both parties to the loan can claim separate deductions on the interest and principal repayment up to the limits mentioned above. Again, these benefits are only applicable if you opt to file tax under the old regime. If you choose to file tax returns under the new scheme introduced in 2023, you will not be able to avail of these deductions.

To access home loan benefits as a salaried employee, be sure to get a Home Loan Interest Certificate from your lender. It is best to share this certificate with your employer for adjustments related to TDS (Tax Deducted at Source). You can also file it under the deductions section in your Income Tax Return (ITR).

Availing of tax benefits on a home loan as a salaried employee can help you save up while paying taxes. It can go a long way in allowing you to manage your finances more efficiently while paying off your home loan. If you are in the market for a new home, Lodha’s construction quality and reputation as one of the best builders in Mumbai, Pune, Thane, and other major cities is unparalleled. While Lodha Acenza in Andheri is a perfect home for first-time buyers, Lodha World Towers in Worli allows you to experience a beautiful life with unmatched luxury in the heart of the city.