ITR filing: How to combine two home loans to save money and claim Income Tax exemption

 


Combining two home loans can help in saving money and also helps in boosting credit score. You can merge the two home loans by following a few simple steps. Income Tax deductions can also be claimed on the interest paid for home loans.

Housing loans are now easily available these days, specifically for those with high credit scores. There are many people who also avail multiple home loans due to easy availability or their needs to acquire more property. Home loans generally come with longer tenure of at least 15 to 20 years and above. So, it could be difficult for many people to maintain multiple home loans in the long run.

However, combining multiple home loans can save you money. For combining two different home loans you can opt for the debt consolidation approach. Debt consolidation will help you club all the smaller loans into one and allow making repayment of all the debts with one EMI.

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Here are some of the simple ways of consolidating debts such as:

GETTING A SELF-CONSOLIDATION LOAN

Consolidation loans are the offerings that aim to help in clearing the outstanding dues. It allows replacing multiple high interest EMIs as a single instalment at a reasonable interest rate as well. This makes the repayment more manageable as one has to only look for a single loan rather than many at a time.

FINDING LENDER WITH LESSER INTEREST RATE

While consolidating the home loans into one, you should find a lender that would allow merger of two home loans at a lower interest rate using the balance transfer. This will also allow getting other benefits that the new lender has to offer, such as discounts.

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ADDING A TOP-UP LOAN

One can also take a top-up loan that would allow closing one of the existing home loans. Generally, the loan with a lesser amount should be closed with the top-up loan.

BENEFITS OF DEBT CONSOLIDATION

There are several benefits of debt consolidation as it can make the payoff more manageable and faster with lower interest payments.  

MANAGEABLE FINANCES

Combining two or more loans can lead to reducing the number of payments and interest rates. This reduction will also help in keeping the track of EMIs and even lower your EMI amount.

Read More: ITR Filing for AY 2023-24: Tax saving tips for Gen Z filing ITR for first time in India

DEBT CONSOLIDATION MAY FASTEN THE PAYOFF

Due to the savings after the debt consolidation, there is a possibility of repaying the loan faster and earlier than the due dates. On the other hand, it will be yet another point for increasing the credit value by showing the loan repayment history in future.

REDUCED MONTHLY PAYMENT

With consolidating the debt, the overall monthly payment can be decreased and can offer advantage while budgeting on a monthly basis. One will be able to repay higher amounts towards the EMIs.

IMPROVES CREDIT SCORE

This helps in improving the credit score in many possible ways. Debt consolidation makes the repayment consistent as it is more manageable and eventually paying the loan off on a given time improves the score.

CLAIMING INCOME TAX BENEFIT ON HOME LOAN

In addition to these, one can claim tax benefits on the home loan while filing Income Tax Return (ITR). There are several sections of Income Tax Act, 1961, which allow exemptions on payment of interest and principal amount for home loans.

Under Section 80C of the I-T Act, a maximum of Rs 1.5 lakh can be claimed towards principal paid on the home loan EMI, but the house property should not be sold within five years of possession. Besides this, a deduction for stamp duty and registration fees can also be claimed under Sec 80C for a maximum amount of Rs 1.5 lakh.

You can also claim deductions for interest paid on home loan for multiple loans, but the limit is capped at Rs 2 lakh, under Section 24b.

In case of a home loan taken jointly, each loan holder can claim a deduction for home loan interest up to Rs 2 lakh each under Section 24b of the I-T Act and principal repayment under Section 80C up to Rs 1.5 lakh each.

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