Buying a property or house to reduce the tax liability

It is best time to start your tax saving plan or planning your tax saving strategies as the financial year comes to an end. Buying a property or house can also be used to reduce the tax liability to a certain extent.

Under Section 24 of the Income Tax Act, interest paid up to Rs 1.5 lakhs per annum on a home loan can be set-off from salary or business income. In case there are co-owners to a property, each of them can claim tax benefits separately , in proportion to their share holding in the property.Co-owners can claim a deduction of up to Rs 1.5 lakhs per annum separately, on interest paid towards a self-occupied house, and also up to Rs 1 lakh per annum towards principal amount repaid.

Under Section 88 of the Income Tax Act, a home loan borrower can claim a deduction of up to Rs 1 lakh from his taxable income on repayment during the year along with specified savings instruments like provident fund. Under Section 24 of the Income Tax Act, the entire pre-EMI interest amount is allowed as a deduction equally over five years (20 percent of total interest paid per annum), starting from the year in which the construction is completed.

Source: The Economic Times

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