Follow This Guide and Avail EPFO and Income Tax Benefits on Your Home Loan

With the price of real estate increasing steeply, it often becomes challenging for individuals to spend a lump sum for property purchase. According to a report, the price of houses grew at 6.5% on an average Year-on-Year in September 2019.

In such a scenario, one of the most convenient ways to fulfil one’s housing dream is via a home loan. It provides not only sufficient funds to meet the financial requirements pertaining to house purchase but also offers several income tax benefits that can save a substantial amount in a fiscal year. Nonetheless, in this regard, individuals considering repayment of these loans via corpuses like EPF withdrawals must also be aware of a few essential guidelines regarding the same.

How is EPF withdrawn for home loans?

Employee Provident Fund Scheme or EPF allows individuals to save a portion of their monthly salary towards a retirement corpus creation. However, employees can also withdraw funds during an emergency from EPF, following the guidelines of the Employee Provident Fund Organisation (EPFO). According to their rules, an individual can withdraw up to 90% of the PF amount to repay a loan in special cases, including a home loan. 

Moreover, an individual requires a clear idea about the withdrawal rules propounded by EPFO. It includes –

According to Para 68-BD in the EPF Scheme, 1952, an employee can apply for almost 90 % of PF corpus withdrawal to make a down payment for a new house, to construct a house or to repay a home loan. 

To utilise this fund, an individual needs to be an EPF member for at least 3 years.

The member has to have a total PF balance over Rs. 20,000 to utilise this fund. 

However, an individual can withdraw money from EPF only once for loan repayment. 

Hence, using the EPFO facility, you can buy your dream home with a loan and repay conveniently. Moreover, availing a home loan also offers several tax benefits that you can take advantage of while filing an income tax return.

Income tax benefits available for home loan borrowers

Paying tax on income is imperative for every individual of Indian origin if his/her income qualifies for such payment. The I-T Department of India has pre-specified different income tax slab rates that cover individuals from all income groups.

In this regard, individuals who are servicing a home loan can enjoy some specific tax deductions during the filing of income tax return. Different sections are dedicated to claiming such deductions for each component of loan repayment, i.e., the principal and the interest component.

Following are the major tax deduction provisions that any home loan borrower should know.

Section 80C allows you to claim a deduction up to Rs.1.5 lakh towards the repayment the loan principal. You can also enjoy a tax deduction on stamp duty, registration charges as well, vide this section. 

Similarly, section 24b provides a provision for deduction of up to Rs. 2 lakh for interest payment towards your home loan. It further includes pre-construction as well as post-construction interest repayment.

However, to claim such deductions when making repayment via the EPF corpus, you must ensure that your spouse is a home loan co-applicant as well as a co-owner of the house so purchased via this loan. It, nevertheless, doesn’t mandate the spouse to be an earning member to be a co-applicant.

All these points constitute a significant part of things to about saving on Income tax rate in India via home loan repayment.

Besides, several financial institutions offer home loans of up to Rs.3.5 crore at competitive interest rates to make repayments affordable.

Moreover, they simplify loan processing via their pre-approved offers on several financial products, including home loans and loans against property. You can check your pre-approved loan offer with a few essential credentials. 

However, before applying for a home loan, you should check out what are the tax savings and other advantages offered by home loans today. It can thus save a considerable amount while you proceed with e-filing income tax for a financial year.

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Priya Bagga

Hello, I am Priya Bagga. I have knowledge of Search Engine Optimization (On-Page as well as Off-Page). I also do guest blogging in my free time.