How to Avail Tax Benefits on Education and Home Loans?

Bank loans are usually looked upon as a burden- a liability. However, there are certain ways through which you can actually enjoy tax benefits with them.

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Broadly speaking, there are two common loans on which you can get tax benefits. These are:

Education Loans

As per Section 80E of the Income Tax Act you are entitled to tax benefits if you have taken an education loan for funding your higher education. However, the tax deduction is only applicable on the amount you have to pay in the form of interest, and not the principal amount itself.

You can avail tax benefits for a period of maximum 8 years or the entire term of repayment (whichever is shorter).

Home Loans

The Section 80C of Income Tax Act has a provision for a tax deduction on the amount paid for the principal of a loan. You also qualify for a deduction on the interest amount paid for the loan. However, the interest amount deduction is capped at Rs. 2 lakhs for any self-occupied property.

Home Loan for a Second Home

If you have taken a home loan for a second house in the form of a joint loan, then you and your spouse can both claim a tax deduction of Rs. 2 lakhs.

If you have let out the property then you can claim a tax deduction on the amount paid as interest for up to Rs. 2 lakhs. However, before the new rules that were implemented from April 1^st, 2017 onwards, there was no such cap.

It is unfortunate that many people are unaware of the tax benefits available with education loans and home loans. However, by availing the same you can indeed save a lot of money.