Spend, Save and Invest Smartly
It is the festive season. You have just spotted the house of your dreams. A bank is offering home loans at competitive rates. This is the opportunity you have been waiting for.
Yes..... you also get tax benefits when you avail a home loan.
You are 30 years of age and earn INR 12 Lakhs a year. You stay in a rented house in Kolkata paying INR 25000 as rent. You have availed a home loan of INR 40 Lakhs for tenure (time period) of 20 years. You pay an interest on the home loan at 11%.
|Year||EMI (Year)||EMI Principal(Year)||EMI Interest(Year)||O/S Balance|
|Before tax exemption(INR)||After tax exemption (INR)|
|House Rent allowance||3,00,000||62,300|
|Children's education allowance||5,000||5000|
There is a rule which you need to know to calculate your House Rent Allowance.
Exempt up to INR 15000 a year. You pay tax on the remaining amount of INR 10000.
You get a tax exemption up to INR 9600.You pay tax on INR 12000 – INR 9600 = INR 2400.
It is exempt up to INR 300 a month for 2 children. You are unmarried hence full INR 10,000 is taxed.
It is exempt up to INR 100 a month for 2 children. You are not married and the full INR 5,000 is taxed.
Your contribution is fully tax deductible under Section 80C up to INR 150000. Hence INR 74760 is fully deducted.
Assuming Professional tax is paid by the employer, it is first shown in gross salary and then deducted under section 16 (iii).
Your taxable salary after availing exemptions is INR 937700.