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Tax Benefits on Home Loans & Educational Loan

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Learn about tax benefits on Home Loans & Educational Loans. View the presentation to read more about tax exemptions on different loans. – PowerPoint PPT presentation

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Title: Tax Benefits on Home Loans & Educational Loan


1
Tax Benefits on Home Loans Educational Loans
(C) Axis Bank Ltd.
2
Tax Benefits on Different Types of Loans
  • While taking a loan allows you to fulfill
    requirements like buying a house or financing
    your childs education, the repayment of this
    loan along with the interest levied on it, does
    affect your monthly as well as annual finances
    for other expenditures.
  • However, there is an additional beneficial side
    to loans which is the tax saving angle.
  • The Indian Government allows tax benefits on
    different types of loans.
  • As per different sections of the Income Tax Act,
    1961, loans can be used as tax saving instruments
    as well.

(C) Axis Bank Ltd.
3
Tax Benefits on Home Loans
  • When taking a home loan for purchasing a
    property, an individual is eligible for tax
    deductions on both principal amount as well as on
    the interest that is paid for servicing the loan.
  • Deductions on Principal Amount
  • Tax benefits for the principal loan amount as
    defined under Section 80C of the Income Tax Act,
    1961, now allows a maximum deduction limit of
    1,50,000 INR and this amount is inclusive of
    other tax saving investments as well.
  • These deductions are applicable only once the
    construction of the property is complete and not
    for the time period during which the property was
    under construction.

(C) Axis Bank Ltd.
4
Tax Benefits on Home Loans
  • Deductions on Interest Amount
  • Section 24 of the Income Tax Act has certain
    provisions that allow tax benefits on the
    interest paid on the principal loan amount.
  • For construction or purchase of a new property,
    you are eligible for deduction of up to Rs. 2
    Lakhs for the interest amount paid, if the
    property construction was completed within 3
    years from the end of the financial year in which
    the loan was issued.
  • If the property is not acquired/constructed
    completed within 3 years from the end of
    financial year in which the loan was taken, the
    interest benefit in this case would be reduced
    from 2 Lakhs to Rs 30 thousand only.

(C) Axis Bank Ltd.
5
Tax Benefits on Educational Loans
  • Unlike home loans, only the interest on
    repayments is applicable for deduction and not
    the principal amount.
  • As defined in Section 80E of Income Tax Act,
    1961, this deduction is applicable only for an
    individual for higher education with no fixed
    upper limit.
  • Here, higher education can be defined as any
    course that you pursue after Senior Secondary
    School Level in India or abroad.

(C) Axis Bank Ltd.
6
Tax Benefits on Educational Loans
  • It is important to understand that the education
    loan should be taken from a financial or approved
    charitable institution, to be eligible for tax
    benefits and you can avail this tax benefit for a
    maximum period of 8 years or full loan repayment
    period, whichever is applicable.
  • For e.g., if you have paid off your education
    loan within 5 years of the course completion,
    deduction benefit can be availed only for that
    time frame and not beyond that.

(C) Axis Bank Ltd.
7
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(C) Axis Bank Ltd.
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