How much does buying a house save on taxes?

Buying a house with your own money does not provide you any tax benefits. However, if you buy a house with the help of a  home loan, you can avail tax benefits under various sections of Income Tax Act.

You can claim tax deduction for up to Rs. 1.5 lakhs on your principal amount and up to Rs. 2 lakhs on the interest payment under section 80C and 24 respectively. Apart from that you can also claim tax deduction for up to Rs. 1.5 Lakhs under 80C on stamp duty charges and up to Rs. 50,000 under section 80EE.

Although a home loan comes with multiple benefits, your tax saving should not be the main objective for taking a home loan. The benefits will be meagre when you compare with the interest payment and long time financial burden. Moreover, it is of no use if you had claimed Rs. 1.5 lakhs under section 80C through other investments. For claiming deduction on interest payment, it is allowed only after 5 years of construction.