Let us look at how the home loan provisional and interest certificates can help you file and get tax benefits.
Banks give you a home loan provisional certificate summarising your loan, including interest and the principal for the current financial year. Your home loan gives you certain tax benefits. On payment of the home loan EMIs, you are entitled to tax benefit u/s 80C (Income Tax Act) for the payment towards principal and u/s 24 for the payment towards interest on the loan, subject to a maximum limit of Rs 1.5 lakh and Rs 2 lakh, respectively.
A provisional certificate helps borrowers to know about the principal and interest payment on their existing home loans. Let us look at how the home loan provisional and interest certificates can help you file and get tax benefits.
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When you take a home loan, the lender provides you with a statement for repayment estimation at the start of the financial year, along with the breakup of interest and principal that you have to pay to the bank as per the prevailing interest rate and charges.
Adhil Shetty, CEO, Bankbazaar.com, explains, “This statement is called a home loan provisional certificate. It’s just an estimation of your repayment as per the condition agreed upon at the time of the loan agreement and the prevailing interest rate.”
Why Do You Need This Certificate?
Employers usually require an estimation of the tax saving that employee plans during a financial year. Therefore, if an employee has taken a home loan and is looking for tax deduction benefits under Sec 80C, Sec 24, Sec 80EEA, etc., he needs to provide the details of estimation for the interest rate and principal repayment at the start of the financial year. So, banks provide a home loan provisional certificate to borrowers that consists of all the details like estimated interest and principal payment during the year, current outstanding loan and estimated outstanding loan at the end of the financial year. The borrower can provide a home loan provisional certificate to the employee so that they can determine the TDS accordingly.
Shetty adds, “It consists of details such as actual interest levied on the loan, interest and principal paid by the borrower during the financial year, remaining loan amount, current EMI, etc. This certificate helps establish the tax deductions you can claim due to your home loan principal and interest payments when filing your returns.”
How to Get Home Loan Interest Certificate?
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You can request a home loan interest certificate from the lender through online banking, by sending an Email or contacting customer care, or by giving an application at your local bank branch. If you have taken a home loan jointly, you can get the home loan provisional certificate from the bank with the bifurcation of details as per the percentage of ownership of the property and the loan.
