Income tax act provides various tax exemptions that can be claimed at the time of filing income tax returns.The total income taxable would be taxed as per the tax slabs of the individual.
Income tax department encourages its citizens to make use of various tax deductions,tax exemptions allowed under the IT act which helps the taxpayers to reduce taxes legally in india.
Exemption of tax on Home Loans
Money borrowed from bank to purchase a house. Home loans consists of an adjustable or fixed interest rate and payment terms.
Important aspects of tax benefits on home loans in India are listed below:
- Both principal and interest paid on home loans is eligible for tax deduction.
- Tax benefits on home loan repayment under section 80C of the Income Tax Act. Maximum amount of deduction allowed is Rs.1,50,000.
- Tax deduction for home loan are valid only if the property construction is completed.
- Customers can have tax deduction on stamp duty and registration charges.This deduction is has a maximum limit of Rs.1,50,000.
- Maximum deduction allowed under Section 24 is Rs.2,00,000 amount of interest paid on home loan.
Tax Exemption on Education Loans
This is when education loans come into play. Education Loans for higher and professional education are offered by various public and private sector banks.
Some points for exemptions of tax on education loans are listed below:
- Tax benefits for education loans comes under Section 80E of the Income Tax Act.
- Tax benefits are applicable only for a financial or approved institution.
- Only the interest paid on education loan repayment is tax deducted and full loan repayment period is maximum of 8 years.
Tax Exemption on Car/Auto Loans
Cars is luxury item and no tax benefit is offered to customers on car or auto loan for purchase of vehicle.
Car loans taken by self-employed individuals that are used for commercial purposes are eligible for tax deduction under section 80C of the Income Tax Act.
Car loans taken by individual do not offer any tax benefit.
Tax Exemption on Personal Loans
Personal loans taken by customers are eligible for tax exemption only for business purpose loans.
Listed above are almost all popular loan types in the Indian market and the tax benefit attached to each. It is always a good to know in depth about different tax exemptions that one is eligible for before one actually uses finance of any type.