{"id":5988,"date":"2015-04-25T12:49:08","date_gmt":"2015-04-25T12:49:08","guid":{"rendered":"http:\/\/www.casagrand.co.in\/?p=1601"},"modified":"2024-12-24T15:33:11","modified_gmt":"2024-12-24T10:03:11","slug":"the-most-tax-efficient-way-to-buy-a-home","status":"publish","type":"post","link":"https:\/\/www.casagrand.co.in\/blog\/the-most-tax-efficient-way-to-buy-a-home\/","title":{"rendered":"The Most Tax-Efficient Way To Buy A Home"},"content":{"rendered":"<p>In today\u2019s scenario buying a home is a fairly expensive affair. A good way to make this big expense as\u00a0beneficial as possible in the long-term, apart from the cash flow and capital appreciation it would\u00a0generate, is to be well aware and make efficient use of the taxes you will be eligible for once the home\u00a0has been purchased. While most people are aware of the deduction on home loan interest and principal\u00a0components mentioned below, there are a few other tax benefits too that aren\u2019t very commonly known\u00a0and not utilized by a lot of home buyers.<\/p>\n<ul>\n<li><strong>Deduction on pre-construction interest<\/strong><\/li>\n<\/ul>\n<p>One very useful tax deduction option is the one available on pre-construction interest. It is a\u00a0known fact that most of the houses that are purchased today are either planned for\u00a0construction or under construction. In such a case you might have to pay interest on loan even<\/p>\n<p>when the house is under construction. For interest on loan during the pre-construction phase,\u00a0you can sum up the entire pre-construction interest paid and claim the same in five equal\u00a0installments. The maximum amount that can be claimed as deduction is Rs. 2 Lakhs.<\/p>\n<ul>\n<li><strong>Deduction on interest component<\/strong><\/li>\n<\/ul>\n<p>You can also claim deduction for the interest paid on the home loan taken to buy a property. A\u00a0maximum of Rs. 2 Lakhs can be claimed as deduction under section 24. You need to be the\u00a0owner of the property and also a borrower in the loan to claim this deduction.<\/p>\n<p>If the loan taken is on a property which is under construction, then the deductions can be\u00a0claimed starting the year in which the construction is completed.<\/p>\n<ul>\n<li><strong>Deduction on principal component<\/strong><\/li>\n<\/ul>\n<p>When you borrow a loan and pay back your monthly installments, a certain portion of the EMI is\u00a0paid towards the repayment of the principal amount. The principal repayments can be summed\u00a0up for the year and claimed as deductions under the section 80c. The maximum amount that\u00a0can be claimed as deductions is Rs. 1.5 Lakhs.<\/p>\n<ul>\n<li><strong>Deduction on stamp duty and registration charges:<\/strong><\/li>\n<\/ul>\n<p>Deduction is also available on stamp duty and registration charges paid on purchase of a\u00a0property. The claims under Section 80c have to be made in the year in which the payments are\u00a0made.<\/p>\n<ul>\n<li><strong>Joint Home loans<\/strong><\/li>\n<\/ul>\n<p>Another useful tax deduction scheme that isn\u2019t utilized to the fullest is the benefits on joint\u00a0home loans. It is a known fact that for individuals the limit for tax deductions is up to 1.5 lakhs\u00a0and 2 lakhs for interest and principal components respectively, as mentioned above. However, if\u00a0you take a joint home loan along with your spouse in a 50:50 ratio then both of you can claim\u00a0the tax benefits individually. This means that for the same loan both of you together can avail a\u00a0claim deduction of Rs. 3 Lakhs under section 80c and Rs. 4 Lakhs under section 24 reducing the overall loan cost to a considerable extent.<\/p>\n<p>If you fall under the highest tax slab then the total deductions of you and your spouse will be close to Rs. 7 lakhs. It is however important to mutually work out the ownership share to capitalize on the tax benefits. The spouse in the higher tax bracket should have a higher share to ensure maximum benefits are obtained.<\/p>\n<ul>\n<li><strong>When selling an old home to buy a new one:<\/strong><\/li>\n<\/ul>\n<p>Long term capital gains tax is applicable at 20% on the gains (post indexation) on the sale of a home, if the property has been held for more than three years. However, if the property is sold to buy a new property, then this long term capital gains tax becomes exempt.<\/p>\n<p>However, to make use of this exemption, the new house must be purchased within two years of selling the old house and if you are constructing a house, the construction should be completed in three years. If you want to bide time and not want to invest immediately in a new home, you can invest the capital gains in certain bonds like Rural Electrification Corp. Ltd, National Highway Authorities of India etc. to keep them exempt from tax.<\/p>\n<p>It is important to be aware of all these deductions to make sure that the new home bought helps reduce the tax outgo over the loan tenure and eventually increases the net return on investment on the purchase.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In today\u2019s scenario buying a home is a fairly expensive affair. A good way to make this big expense as\u00a0beneficial as possible in the long-term, apart from the cash flow and capital appreciation it would\u00a0generate, is to be well aware and make efficient use of the taxes you will be eligible for once the home\u00a0has [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":34232,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[249],"tags":[284,391,395],"class_list":["post-5988","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-buying-new-property","tag-first-time-home-buyers","tag-investing-in-real-estate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Most Tax-Efficient Way To Buy A Home - Casagrand<\/title>\n<meta name=\"description\" content=\"Buying a home is a fairly expensive affair. 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