No matter how much we hate taxation, we have to live with it. We all hate the substantial amount of money that is deducted from our salary every month as tax. What we even hate more is the money deducted as home loan EMI. Thankfully, home loan allows you many substantial tax deduction. As per the financial year 2017-18, the upper limit on tax deductions on home loan is set at Rs 2,00,000.
If you are a working professional, you don’t directly need to submit any sort of documents to income tax departments. You can submit them to the employer who will adjust the TDS (Tax Deducted at Source) based on the documents you have provided. This gives you entire year’s time to know your tax liabilities.
In case you are hiring a charted accountant to file tax returns, you need to provide them with all the necessary documents.
List of Documents You Need to Claim Tax Deductions on Home Loan
- Borrower Details: It is necessary because only the borrower or the co-borrower are eligible to claim tax deductions.
- Interest Certificate: Specifying the Principal and Interest details
- Ownership Details: Only owner or the co-owner of the property can claim tax deductions. You cannot claim deduction on entire property as the amount deducted will be proportional to your share in property
- Construction Completion Certificate: This is needed as you are eligible for tax deductions only after the construction is completed.
You can also claim pre-construction interests, payable in five equal instalments starting from the year when the construction is completed.
Calculate your income from the house
The tax deduction for a self-occupied home has an upper limit of Rs 2,00,000. There is no upper limit on the deductions you are eligible on the interest, if you have rented your apartment. Here are the steps for calculating your tax deductions:
- Gross Value of the property
- (Less) Municipal Taxes- if paid during the year
- (Less) Standard Deduction (30 percent of Net Annual Value= Gross value minus Municipal Taxes)
- (Less) Deduction for Interest on Home Loan
- You will arrive at the “Income from House Property” figure
Tax Deductions on Repayment of the Principal Amount
It is eligible for tax deductions under Section 80C, the upper limit on tax deductions of principal amount repayment is Rs 1,50,000. This limit the total of money also invested in Public Provident Fund (PPF) account, Senior Citizen’s Saving Scheme, equity-oriented mutual funds, tax-saving fixed deposits, and National Savings Certificate.
However, you can claim a tax deduction on this only after the construction is complete.