The real estate market is definitely becoming like a fruitful venture for home buyers. With more and more benefits and freebies in the fray along with low interest rates on loans as well as affordable prices, property developers surely have a lot to offer to potential buyers along with offering attractive payment systems.
Evidently, a lot of you will be on the lookout for a home loan to suffice your financial needs in terms of buying a house. Well, looking for the right lender that offers affordable loans at low interest rates can be quite dicey. Add to it the several charges involved while applying for a home loan, borrowers are always insisting on striking a reasonably priced deal with financial institutions.
In this regard, knowing about the various tax considerations involved in the process of applying for a home loan becomes imperative. Unless you are well aware of the rules and regulations, your loan can lead you to burning a hole in your pocket while clearing your taxes.
In this article, we tell you what is a home loan and how you can save yourself and the benefits of paying taxes on home loan processing fee, one of the essential components of a home loan.
What Is a Home Loan?
A home loan can simply be defined as a secured loan that an individual borrows from a financial institution that has to be repaid in the form of EMIs at a certain rate of interest.
What Is Home Loan Processing Fee?
A home loan processing fee is a kind of charge that a person applying for a home loan has to pay to the financial institution or the bank once the application for such loan is accepted by the latter. The fee is a onetime payment that has to be compulsorily paid to the lender.
The fee varies from lender to lender and as such there is no uniformity in this regard.
Let us now look at the tax benefit available with respect to home loan processing fee.
Home Loan Processing Fee Tax Benefits:
To understand the tax benefit available for home loan processing fee, it would be wiser to first appreciate Section 2(28A) of the Income Tax Act, 1961, that deals with the subject.
The perusal of the aforementioned provision makes it amply clear that under the Income Tax Act, home loan processing fee and other charges paid to obtain the loan fall under the category of ‘interest’ and as such, deduction can be claimed on the same.
The deduction can be claimed by deducting the amount under Section 24 of the Act while calculating income from house property.
In fact, this rule of deduction has been reiterated in a myriad of judgments pertaining to income tax calculations.
How to Claim Tax Benefit for Home Loan Processing Fee?
Individuals applying for a home loan are usually unaware that home loan processing charges are open to tax benefits.
In order to effectively claim the requisite tax benefit, ask your bank or financial institution for a certificate regarding the processing fee payable so that you can annex it and avail necessary benefits while calculating your income tax liability.
Ensure that you file your income tax after availing all possible deductions so that you do not have to bear the brunt of paying high taxes, thus ensuring your financial soundness. After all, it’s all about investing with fiscal prudence. Isn’t it?
Now that you know everything about the various tax benefits of home loans, apply for one with Finserv MARKETS and take advantage of a plethora of features and benefits right from the comfort of your home. So why wait? Head over to Finserv MARKETS and apply for a home with us, today!
Also read what are the tax benefit on personal loan only at Finserv MARKETS.
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