Home loans and rents payable, both play a significant role in offering great income tax returns. One must understand, that loans are a dicey investment, as irrespective of however much one may save, they pay a lot more than that in interests.
One has to find the right bank, which does not cheat them but provides genuine assistance. When one takes a home loan, they are liable for a tax rebate under the law. This rebate is received in the form of Income Tax Returns. These returns usually arrive a few months after one has paid the taxes.
So how are taxes related to home loans?
Impact Of A Home Loan On Taxation
When one acquires a home loan, he/she is entitled to a tax rebate, of the amount equivalent to the payment of EMIs each month. This total cannot exceed a particular amount yearly. Thus, when one files tax papers, they need to attach loan papers and payment receipts along with them, as evidence. The IT department proofreads these and based on it, a tax rebate is provided. One must remember that there are different clauses when one has rented out the house, for which they have acquired the loan.
Rented House Returns Policy
When one rents out a loaned property, the income received in the form of rents is taxable. Thus, one needs to pay taxes in proportion to the amount one earns from the loaned house. This is added to the Annual Income, and tax reductions are then calculated in proportion to one’s income bracket. One is still liable to receive a tax rebate on the amount paid as EMIs towards the loan repayment.
On a whole, a careful understanding of this concept is a must. Many a time, people do not consider house rent received as taxable, and thus, struggle when less or no tax returns are received.
The confusion behind the owner name
At times, individuals tend to purchase a house in their name but apply for a loan in the name of a senior citizen to receive higher incentives.
So is one entitled to a tax rebate in such a case? No! Tax rebates are provided only if the owner of the house and the loan claimant are the same.
So how can one get better tax returns then? Simply make the senior citizen the Co-Owner of the house. That will help one to receive a tax rebate, and the loan too, at a decreased interest percentage.
Double Claims
At times, another interesting way to get high-income tax returns on home loans is to file things in the name of multiple parties. So, if a husband and wife, both file a tax return for the same property, both are entitled to a tax rebate. However, there are a couple of conditions for the same. Firstly, the home loan must be acquired in the name of both parties, and secondly, both parties i.e. the husband and the wife should be the co-owner of the house.
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