Unlocking Tax Savings: Home Loan Requirements And Strategies For Homeowners
Home loan-providing companies have made it mandatory for their clients to update their KYC documents- you need to submit proof of your identity, income, and employment.
Home Loan Requirements These documents are aimed at making an overall background check of the borrower.
Your income and employment proofs differ depending on the property you desire to purchase and the occupation category you fall into.
Let’s now down to check the documents that you essentially need for your home loan requirements.
Documents Required For Home Loans
Below is a list of all the mandatory documents you need to submit for your home loan:
- Accurately filled out the loan application form
- Passport-sized photographs
- Identity proof, i.e., Aadhar card, PAN card, driving license, Voter Id
- Residence proof, i.e., Passport, utility bills, etc.
- Bank account statement for the last six months
- Asset and liability statement
- Property-related documents
- Salary slips from employees for a salaried individual.
- Income tax returns for the last two financial years for a salaried individual.
- Income tax returns or assessment copies of the last two years for a self-employed individual.
- Challan for Advance Income Tax Payment
- Business details proof from a self-employed individual.
Every lender has his own list of documents to be fulfilled. Go through each of these carefully to fit the eligibility criteria.
KYC Documents For Home Loan Requirements
Some KYC documents to submit for the Home Loan Requirements include:
1. Photo ID proof
- PAN Card
- Driving License
- Voters ID
- Aadhar Card
2. Residence proof
- Electricity Bill
- Ration Card
- Employment letter
- Bank statement with address
3. Proof of Age
- PAN Card
- Birth Certificate
- Driving License
- Personal details page of bank passbook
- Marksheet- Class 10
Tax Benefits on Home Loans
Getting a home loan is an expensive act in itself, but with the right knowledge of tax regulations, you can save on your taxes every year. A home loan will help you save tax under the provision of the Income Tax Act of 1961.
According to the recent update in the budget speech of Union Finance Minister Nirmala Sitharaman, you are eligible for tax reductions under the home loan by following specifications:
|Income Tax Act||Max. Deductible Amount|
|Section 24||INR 2 lakh per annum|
|Section 80C||INR 1.5 lakh per annum|
|Section 80EE||INR 50000|
Over and above these, if you are a home loan borrower looking to make additional savings, we have discussed some legal strategies you can take into account and get the maximum tax benefit for increased savings. Let us check this out:
Strategies To Save Tax On Home Loans
With the mentioned tax acts, you can save money strategically in the following way:
- Under Section 80C, you can have tax savings on home loan. If you own a self-occupied property, the main part of the EMI can be deducted from your final taxable income. You can also extend this deduction to the stamp duty and registration fees you have paid. If you have another property that is empty or occupied by a family, that also falls under the category of self-occupied. However, if the second property is a source of your rental income, then the tax rules change accordingly.
- Under Section 80EEA, you are eligible for tax benefits on interest and principal amount. If the home loan is on the house you use as your primary residential address, you can claim a deduction of up to INR 2,00,000 on the interest paid. However, any amount beyond INR 200000 cannot be carried forward. If you own two houses and only have one as your self-occupied home, you are only eligible for tax benefits for that house.
- Under Section 80EE, if you have taken a mortgage loan on your first home, you are eligible for a tax deduction on the amount you pay in interest. With the introduction of new reform under Section 80EE, you can get a new deduction of INR 50000 above the initial INR 200000 of Section 24. But this is a benefit that only the first-time homebuyers can avail.
Saving tax on your home loan is a skill that you can master by staying on top of the tax reforms and ensuring that you follow your financial setup strategically.
Make sure you follow all the necessary steps and establish yourself with all your credentials, so you can get optimized interest rates and understand the tax structure- use it to your benefit legally, so it helps you make higher savings in the long run.