If you sell the house taken on home loan within 5 years, then you will not get this benefit
Under the old tax system, a salaried person with an annual income of more than Rs 2.5 lakh comes under the purview of income tax. However, up to Rs 5 lakh can be exempted from income tax through various means. Income tax law allows individual taxpayers and companies to obtain tax exemptions in a number of ways. In this, through home loan, you can save tax under many sections. Tax exemption up to Rs.1.5 lakh can be claimed by paying the principal amount of the home loan under Section-80C of the Income Tax Act. However, there is a condition attached to it, under which if you sell the home taken on the home loan within 5 years, you will incur a loss.
Let us tell you that buying a house or flat is not only a big investment, but it is also important from the income tax point of view. The long time between selling an old home and buying a new home can increase your tax liability. At the same time, selling a new home immediately after buying it can increase your tax liability. The construction of the property also needs to be completed within 5 years from the end of the financial year of taking the home loan to avail the full benefit of tax savings through home loan. Whereas, if the property is transferred or sold in 5 years, the tax deduction claimed will be added to your income in the year of sale. Then income tax will be levied as per your existing tax slab. Simply put, if you sell a property in 5 years, you do not get the benefit of tax exemption and the liability increases.
Let us tell you that on buying a house, one gets the benefit of tax exemption on home loan EMI. You can avail tax exemption under 80C on a part of the principal amount in EMI including stamp duty and registration fee. Interest on home loan is divided into two categories namely interest before construction and interest after construction. Under section 24B, the interest paid after the completion of construction is eligible for tax exemption of up to Rs 2 lakh. This exemption can be claimed from the year the house is completed. However, most people take home loans for under-construction properties. After the work is completed, they take possession of it. But, the home loan repayment starts immediately after taking the loan. Such persons can be given a rebate of up to 5 years on interest up to 5 years prior to completion of construction under section 24B. If a buyer buys a house under the affordable housing category, he can claim a deduction of up to Rs 3.5 lakh.