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Save More With Tax Benefits of Home Renovation Loan

By IIFL Home Loans | Published On Jul 12 2023 11:09 AM 1 min read 85 views 642 Likes
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Your home is your place of living. It is a reflection of your status, lifestyle, tastes, and personality. A beautiful home with organised spaces and pleasing aesthetics keeps you and your loved ones calm and optimistic. However, buying and maintaining a house are big-ticket expenses.

Home improvement loans, also known as home renovation loans, help you obtain funds quickly for revamping your house. They also help you save money on taxes. Wondering how? Is there a tax credit on home renovations? The answer is 'yes'.

This article discusses the many aspects of home improvement loans and their tax benefits.

What is A Home Renovation Loan?

A home renovation loan is an amount sanctioned by financial institutions for expenses related to refurbishing a house. The loan rate differs from person to person. It depends on your credit score, loan amount, repayment history, and property type. IIFL Home Loan offers home improvement loans up to ₹50 lakhs at attractive rates.

How Does House Repair Tax Deduction in India Work?

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How to calculate tax savings?

Section 24(b) of the Income Tax Act,1961, governs home renovation loan tax benefits. You can claim tax rebates of up to ₹30,000 every year on the interest you pay on home improvement loans. This deduction can be claimed only if you self-occupy the house you are renovating. This amount forms part of the total permissible deduction of ₹2 lakhs p.a., under Section 24.

For example, suppose you claimed a tax deduction of ₹1.8 lakhs on your home loan interest payments. In this case, you can receive tax rebates of up to ₹20,000 p.a. on your home renovation loan. However, the principal amount of a home improvement loan is not eligible for tax benefits under Section 80C.

What is Repair and Maintenance TDS?

If you are hiring a contractor for renovating your home, you must deduct the repair and maintenance TDS at the time of making payment to the contractor. TDS stands for Tax Deducted at Source. The tax deduction rules as of June 2023 are as follows:

  • As per Section 194C of the Income Tax Act, you must deduct repair and maintenance TDS under the following conditions:

    • The contractor is a resident and did not do technical/professional work.

    • The contractor's fees exceed ₹30,000 in a single transaction.

    • The total contractor charges cross ₹1 lakh in the financial year.

  • TDS must be deducted under Section 194J when:

    • The resident contractor provides technical/professional services. For example, an architect, or civil engineer.

    • The contractor invoice amount is over ₹30,000.

  • You must deduct repair and maintenance TDS under Section 194M if:

    • You are an individual/Hindu Undivided Family with a business turnover of less than ₹1 crore p.a.

    • You are a professional with an annual income below ₹50 lakhs.

    • The contractor bill exceeds ₹50 lakhs p.a.

Check the income tax website for the latest TDS rates under each section.

Why Should You Take Home Improvement Loans?

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Get a home makeover without financial stress!

Home renovation loans lower your financial burden. They help you maximise your savings through tax benefits. All homeowners can apply for this loan. The application process is quick and hassle-free.

You also get readymade online home renovation cost calculators in India. They help you calculate your estimated home improvement costs and loan amount needed.

IIFL Home Loans offers home renovation loans for tenures of up to 25 years with flexible repayment terms. What are you waiting for? Check out home improvement loans today and remodel your home at affordable rates while saving taxes!

FAQs

1. What costs are covered by home improvement loans?

Home improvement loans cover expenses like bathroom tiling, construction work, kitchen makeovers, room extensions, re-flooring, and more. They also cover the costs of raw materials, contractors, and interior designers.

2. Who can apply for a home improvement loan?

The eligibility conditions for home renovation loans are as follows:

  • You are a resident Indian, non-resident Indian (NRI), or a person of Indian origin (PIO).

  • You are salaried or self-employed.

  • You are between the ages of 18 and 75.

3. Should you have a co-applicant?

Having a close family member as a co-applicant helps you get a bigger loan amount. Women co-applicants get better interest rates. Thus, you can make your mother or wife a co-applicant, even if they are not earning.

4. What documents should you submit with the loan application?

  • Identity and address proof (Passport, PAN, Aadhar card, Voter ID, etc.)

  • Income proof (Salary slips, bank statements, latest tax returns, etc.)

  • Property documents — Ownership proof, approved plans, and construction estimates.

  • Passport-size photos.

  • Cheque for loan processing fees.

  • Past 6 months' bank repayment statements for running loans.

  • Appointment letter/Employment contract.

5. How much home renovation loan tax benefit do you get?

You save up to ₹30,000 in taxes on the loan interest. You may also save money through repairs and maintenance TDS cuts on contractor payments.

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