Save more taxes with Home Loan

The best way for saving maximum amount of income tax in India is taking first home loan where you are allowed to save tax up to Rs. 25 thousand yearly. This is the enough amounts on taxes, and many taxpayers in India are saving their Income tax by paying home loans. Currently as per income tax law as on March 2014, maximum allowed exemption on housing loan is Rs 1.5 lac in interest and Rs. 1 lac is allowed in principle part of amount for a year which is covered under income tax law.

At the time of Income tax returns, note that there is a difference between a tax deduction and a tax credit and most of the people mistakenly believes that the two are interchangeable at the time of ITR filing. When you get complete TDS certificate, housing loan interest certificate and receive a tax credit note, the taxable amount of what you have to pay that year is reduced by the amount of the credit amount as exemption on the year. With a normal tax deduction from all sources of income, simply you just need to show all amount of income is reduced, and then you pay taxes on the principle or annual income amount reduced from the income based on your tax rate. Let's say you pay Rs. 2.5 Lac a year in home loans interest+ principle and you are in the 25 percent tax bracket. Your taxes are not reduced by Rs. 2, 50,000 for the year, your mortgage interest deduction is “worth” Rs. 45 k to you, which is the fix amount of interest you paid, divided by your income tax rate for the year.

The Home Mortgage Interest Deduction

The higher your tax bracket, the more home mortgage interest deduction is worth to you because the deduction is based on your tax rate as per the law of land. For an normal earner for higher slave in the 20 percent bracket, Rs. 1,50,000 in interest means Rs. 25,000/- in tax savings, but for someone who is in the 30 percent tax bracket, so it’s a savings of Rs. 45, 000/- per year. The interest on up to Rs. 2, 50,000 in loans secured by property using the home as property collateral is also tax deductible as per the income tax law, regardless of charges on housing loan and how the borrowed money is used for. You should be careful for it, however, sometimes that if your consolidate total amount of EMI debt exceeds the value of the property as per the banks market valuation of the property in your city, where you will not be able to deduct the full amount and sometime your end use remain pending. So it is a point of concern if you do not itemize deductions of debt or if you are subject to the alternative option of Minimum Tax saving (AMT), this one point is very important for you as may be you will not be able to receive any of the benefits of the home mortgage interest tax deduction. So invest more and save more tax with home loan in to all segment provided by government of India like government bond, insurance, and some more other ways.

Author Box: With Deals of Loan, home loan interest rates are as low as 10.5% reducing rates, hence with spending little from your yearly balance, you end up saving a lot of income tax. Deals of loan offers best home loans all around India.