Monetary loan

Is it wise to pay off the EMI home loan and avoid the income tax expense?

RTI deposit: The Income Tax Return (ITR) filing deadline (March 31, 2022) is fast approaching and earning individuals are busy finding various ways to save their income tax. As paying the EMI home loan helps a taxpayer save income tax up to 3.5 lakh of taxable income in a financial year, people consider buying a house through a home loan as an option to save money earmarked for income tax. However, if we follow the opinion of tax and investment experts, EMI home loan is not a good solution to save income tax every time. They said that there are various other factors a taxpayer should consider when buying a home and the home loan tax benefit is just one of those factors.

Speaking on the tax benefits of home loans; Ashish Narain Agarwal, Founder and CEO of PropertyPistol.com, said: “Income tax savings are a big driver in property purchases. However, it would be naive to base the home buying decision simply on the amount of income tax that a Buying a property should be an informed decision as it is a significant transaction and from a purely financial point of view there is several other parameters that a buyer must keep in mind before deciding for or against the purchase.an analysis involving the initial cost, the mortgage cost, the expenses of ownership over the period of ownership and the expected appreciation must also taken into account, then the decision to buy rather than rent must be made.”

Home loan tax refund vs income tax slab

Advise taxpayers to consider other tax saving options when planning their tax return; Shruti Khandare, CMO at MyFundBazaar India Private Limited, said: “If you fall into a 30% income tax slab, it is advisable to buy a house to avoid tax. slab of income tax falling from around 10% to 20% cent, one should consider buying individual health insurance for his family including his elderly parents.This will allow him to claim tax exemption on the income on the annual health insurance premium paid up to 75,000. Additionally, you can opt for an NPS investment and allow further income tax exemption under CCC Section 80 on investments up to 50,000 in a fiscal year.”

Home loan tax benefit calculator

Speaking on the tax benefits available on the repayment of EMI home loans; Jitendra Solanki, a SEBI-registered tax and investment expert, said, “While paying a home loan, a taxpayer can claim an income tax exemption for up to 3.5 lakh of taxable income in a financial year – up to 1.5 lakh exemption on repayment of principal of home loan under Section 80C of the Income Tax Act and up to 2 lakh on repayment of interest on home loans under Section 24 (B) of the Income Tax Act. However, if the taxpayer is a salaried person, then in this case, requesting a tax benefit for a mortgage of 1.5 lakh on home loan principal repayment becomes difficult as tax benefits under section 80C include other exemptions like provident fund, investments in ELSS mutual funds, premium payment LIC, tuition paid for children, etc.

Home Loan EMI Calculator

Asking homebuyers to use the EMI Home Loan Calculator when buying a home to save money for income tax; Jitendra Solanki said, “During the first 4-5 years of the home loan term, approximately 65% ​​of the monthly home loan EMI is paid as interest on the home loan. Thus, to claim a benefit tax on Annual home loan interest repayment of 2 lakh, monthly home loan EMI should be around 30,000. This means that the annual EMI home loan would be approximately 3.60 lakh. As it is necessary to maintain the EMI of the real estate loans below / at 40% of its net net income, the annual net income of the taxpayer is around 9,000,000. So if a taxpayer earns 9 lakh or more per year, then in this case, EMI home loan can be a good option to save income tax.”

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