Advantages of Home Loans for First-Time Buyers
If not for home loans, home-buying would never be easy for first-time buyers. If you’ve been contemplating buying a home but have been postponing your decision, think again. Securing a home for self comes easily, given the various advantages of home loans. Not only do you get a -secure physical asset for yourself, but it also comes with a host of tax benefits. Avail first-time home buyer benefits in India 2023 and become a homeowner much earlier in life.
Importance of a Home Loan
But is it beneficial to buy a home on loan? Let us delve further. Buying a home is an expensive affair. From arranging part cash payment to deciding on the budget and location of your home, the series of tasks make the decision quite daunting. However, with home loans, a lot of things come easily. Home loans come at lower interest rates, and typically you may get a loan worth 70-90% of the market value of the property. Home loans also allow you a flexible repayment schedule and minimal prepayment charges. All in all, the various advantages of home loans make it easy for first-time buyers to own a home.
To encourage people to buy a home/ property, the Govt. of India offers several income tax benefits to buyers/ investors under the Income Tax Act 1961. It allows for a tax deduction for various components of the purchase or construction of a house, primarily if a home loan is taken. Here are some advantages of seeking a home loan.
Advantages of Home Loans for First-Time Home Buyers
Tax deductions allowed on home loan principal
Under Section 80C, the upper limit on tax rebate is up to Rs.1.5 lacs p.a. For senior citizens, it is up to 2 lacs p.a.
Here, if a property is jointly owned, each co-borrower can claim Rs 1.50 lakhs as a tax deduction on their respective incomes under Section 80C. But here, the spouses have to be co-owners as well as co-borrowers.
Tax deductions allowed on home loan interest
Here, the relevant sections under which you get tax benefits are Section 24, Section 80EE, and Section 80EEA. You can get a maximum deduction of up to Rs 3.5 lacs per annum, and for senior citizens, it is up to 4.5 lacs per annum.
Section 24 allows home buyers deductions of up to Rs 2 lakh in a year towards interest payment only for self-occupied properties. If the property is rented, the entire interest amount paid is waived off as a deduction. Tax deductions under Section 24 are on an accrual basis. The interest calculation is separately done for each year, and the rebate can be claimed even if no actual payment is made.
It may be noted that Deduction under Section 24 is also available to buyers who do not use home loans. If a property is jointly owned, each co-borrower can claim Rs 2 lakhs as a tax deduction on their respective incomes under Section 80C. In this case, also, all the owners have to be co-borrowers.
If loan borrowers have paid more than Rs 2 lakhs as interest in a year, they have the option to carry the additional expense forward for another three years, to set off the losses. This holds good for only those property owners who are generating income from the house property.
Benefits under Section 80EE
Avail tax benefits of interest on first-time home buyers in the PMAY (Pradhan Mantri Awas Yojna) Under Section 80EE. Here, a tax deduction can be claimed up to Rs 50,000 after exhausting the waiver provided under Section 24. Also, the carpet area of the unit must be up to 60 sq meters in megacities and 90 sq meters in other cities.
In the affordable housing segment, first-time home buyer tax benefits include an additional tax deduction of up to Rs. 1.5 lakh on the home loan interest component under Section 80EEA.
2. Stability & Security
Owning a home provides a sense of security for an individual and a sense of satisfaction in having a physical asset. A home loan enables the early buying of a house for an individual.
3. Investment Opportunity
Amongst the other advantages of home loans is the investment opportunity that the real estate creates for you. Rent your home or use it as an investment option for better returns.
Check out the above said advantages of home loans when buying a house to make an informed decision.