Wednesday, June 29, 2011
Saving Tax with Loans in India
"Saving Tax" on your income is always a spot of interest for each one of us and why not when there is a legal way? Saving Tax is easier under Indian Income Tax Act if one opts for the home loan. There are two sections of Indian Income Tax which allow you to avail this benefit. 1) Indian Income Tax Act 1961, Section 24 (B) 2) Indian Income Tax Act 1961, Section 80 (C..) If proper investments are made then you can get a total deduction of Rs. 2.5 lacs per year. Under section 24, one can save up to Rs. 1.5 Lacs and under section 80 save up to Rs. 1 Lacs. The Section 24(b) of the Income Tax Act, 1961 is applicable on Home loan for purchase of house or construction of the house property. You can avail a deduction of up to Rs. 1,50,000 of you total tax liability, Also reconstruction or renewal or repairs is eligible for deductions under the said section. The Section 80(c) of the Income Tax Act, 1961 allows you a deduction of up to Rs. 1,00,000 on the principal repayment amount. Example Suppose your total taxable income is Rs. 6,00,000. Hence now your total taxable income becomes only (6 - 2.5 - 1 Lacs) and that saves a lot of money! With property rates increasing at 300% an year, literally tripling your asset worth in an year, makes investment in property a nice avenue for "guaranteed profits" on investments. To make it even better you can save on taxes if you purchase a property for self -- through the loan mechanism. Saving Tax is legal and has never been easier.