The home loan is very common type of loan that is availed by the common man for the purchase of home
February 7, 2014 (Newswire.com) - The loan means borrowing money but the fact is that it can save you money in the form of reduced income tax deductions. The different loans may have different advantages but the home loan may get you the maximum benefit as it directly impacts your income tax deductions. The home loan may be the best way to turn your dream house to reality but it may also be the great choice for increasing your take home salary by reducing the overall income tax payment.
How it works?
The home loan repayment would be in the terms of EMI and this EMI may contain the components like principal amount and interest amount. The Income Tax Act has different rules for these payment components. The tax deduction is usually offered on the interest payment and not on the principal payment. The interest paid up to Rs. 1.5 lac may get direct deduction from the tax calculation. This will reduce your overall tax deduction and hence your take home salary may increase considerably.
Benefits for second home
The benefit may also be offered if you buy a second home for investment. If your second home is also bought with home loan then the benefit will be given on the interest paid on both the houses. The buyer may benefit more if his second home is used for investment purpose while the first home is used by him as his residence. The limit for tax deduction on the interest paid would be on the higher side if one continues to stay in the first house while renting out the second house.
The home loan benefits are known to all by now but the right planning will get you the true benefit out of your loan.
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