Individuals who are willing to renovate their home or are intending to face-lift their current residential space can avail a top-up loan on their existing home loan. Borrowers will also be able to avail income tax benefits in such loans under Section 24(b).
Homeowners are entitled to receive a tax deduction of Rs.30,000 on the payable interest levied on a loan used for home renovation. A borrower can claim a tax deduction of this amount only if the property is owned by him/her. To renovate a house that is rented-out, individuals are eligible to claim complete tax relaxation on the interest.
To claim the tax deductions on their paid interest, customers have to furnish the necessary documents, including bills of renovation cost as the proof.
In case of a home loan, the tax exemption available on the interest paid is up to Rs.2 lakh under Section 24(b). However, the home loan tax benefits cannot be availed for an under-construction property. The exemptions will be available in 5 installments after the construction is completed.
Home loan tax exemption and benefits under Section 80C exempt tax payment of up to Rs. 1.5 Lakh on the principal amount every year. However, the property cannot be sold off within 5 years of possession to avail this benefit.
Joint account holders have the provision of individually claiming tax deductions based on their property ownership share.
Individuals can consider using an income tax calculator to accurately compute their tax benefits on their top-up loan or home loan to avoid any financial ambiguity.
