A home is a dream, a dream that takes a significant lifespan for a person to achieve. We work hard, save plenty and kill many dreams to build a house for ourselves and our family. A home is a fantasy for many, yet an achievable one with the tax benefits in India. Using the benefits smartly, one can buy a home without waiting for a lifetime. Here are a few listed below to educate you about the tax benefits which would come in handy when you plan to buy a house.

Tax savings can come from both the interest and principal elements of a home loan. Individuals who have taken out a loan to buy their house or for building purposes may demand the principal sum under section 80(c) and the interest may be charged under subsection 24(b).

If the loan is taken on or after, one can get a discount on interest portion on home loans of up to Rs. 1.5 lakhs. 1st April 1999 for the development or purchase of a house. This exemption from home loan tax will be gained if the transaction or building is done within three years from the end of the financial year in which the loan was issued. Besides this, a certificate will be issued by the lending bank to certify that interest is due on the loan is taken to purchase or develop a home.

When a person buys a house and wants to sell it within the same year or within a three-year period, he will be liable to pay tax on short-term capital gains. However, if the transaction occurs after three years one is entitled to pay long-term tax on capital gains. This is not taxable if the income sums are deposited in tax-saving capital gains trusts as stated in Section 54 thereby providing significant first-time tax incentives for home buyers.

Only the person who has repaid a home loan will benefit from the tax deductions. If there is a co-borrower on the aforementioned home loan, he or she can demand only minimal advantages from the exemptions that one can take advantage of when applying for a home loan. It’s restricted more to the sum they’ll pay back.

Another tax advantage is available on a home loan if one wants to make payments. If a person who lent money refuses to pay the EMI on time, he will not be entitled to demand the tax benefits on the sum that would have been paid.