When it comes to home loans, combining two loans can be a smart financial move that helps you save money. Moreover, understanding how to claim income tax exemptions for these loans in your Income Tax Return (ITR) filing is crucial. In this article, we will guide you through the process.
Combining two home loans allows you to optimize your finances by taking advantage of lower interest rates, reduced EMIs (Equated Monthly Installments), and potential tax benefits. To claim income tax exemptions on your home loans, here are a few key points to consider:
- Principal Repayment: Under Section 80C of the Income Tax Act, you can claim deductions on the principal repayment of your home loans. This deduction is limited to a maximum of Rs. 1.5 lakh per financial year.
- Interest Payment: As per Section 24(b) of the Income Tax Act, you can claim deductions on the interest paid on your home loans. For a self-occupied property, the maximum deduction allowed is Rs. 2 lakh per financial year. In case the property is rented out or deemed to be let out, there is no upper limit on the interest deduction.
- Joint Home Loans: If you have taken a joint home loan with a co-applicant, both individuals can claim deductions for the principal and interest payments in proportion to their share in the loan. Ensure that the co-owners of the property are also co-borrowers for the loan.
- Completion of Construction: To claim tax benefits on the interest paid during the construction phase of a property, it must be completed within five years from the end of the financial year in which the loan was taken. The deduction can be availed in five equal installments starting from the financial year in which the construction is completed.
- Separate Certificates: If you have taken two home loans, ensure that you request separate interest and principal repayment certificates from the respective lenders. This will help you accurately calculate the tax benefits and claim exemptions accordingly.
While combining two home loans can offer financial advantages, it is important to assess your repayment capacity and consider the associated costs, such as processing fees and prepayment charges. Additionally, consult a tax expert or financial advisor to understand the specific tax implications and eligibility criteria based on your individual circumstances.
In conclusion, by combining two home loans, you can potentially save money through lower interest rates and reduced EMIs. Understanding the provisions of income tax exemptions for home loans and correctly claiming them in your ITR filing is essential for optimizing your financial situation.
