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Owning a house provides a certain level of mental and psychological satisfaction and it creates a sense of social security among the home owners. However, according tax and investment experts, buying a house to avoid income tax is not a good idea. They said that if someone is not sure about how much money one will have to shell out from one's pocket, buying a home may turn out a nightmare. They also said that if someone is not sure about one's duration in a city, it's better to live in a rented accommodation than buying a home.

Speaking on why and when you should buy a home; Mumbai-based tax and investment expert Balwant Jain said, "Banks don't approve more than 80 per cent of the house property cost as home loan. So, a home loan applicant needs to shell out the surplus 20 per cent property cost from one's savings. Also, there is stamp duty and some other miscellaneous charges like brokerage fee, etc., which is also not funded in bank loan. So, a home loan applicant has to look at one's savings before applying for a home loan."

Highlighting other factors that a home loan applicant must consider while buying a home, Balwant Jain said, "If the person willing to buy home is posted in a city for short duration or it has been posted in a city where it don't intend to settle, then living in a rented accommodation is a better choice. Real estate transactions have some hidden costs like stamp duty, registration charges, brokerage for sale and purchase of the house, etc. that can't be recovered."

Ashish Narain Agarwal, Founder & CEO at PropertyPistol.com said, "Buying a home is a very calculated investment in an individual's life and it primarily depends on the person's age, regular income and the market situation during which he/she wants to buy a home."

On whether it is wise to buy home to avoid income tax; SEBI registered tax and investment expert Jitendra Solanki said, "Buying home to avoid income tax may be or may not be advisable because it depends upon the investments and other liabilities of an earning individual. As of now, a taxpayer is allowed to claim income tax exemption on up to 1.50 lakh home loan principal repayment in one financial year under Section 80C of the income tax act whereas the taxpayer can claim income tax benefit under Section 24(B) on up to 2 lakh home loan interest repayment in one financial year. Since, Section 80C exemption includes other investments like ELSS mutual fund, provident fund, LIC, school fee of the child, etc., most of the times it has been found that a home loan applicant don't get able to claim exemption up to 1.5 lakh on home loan principal repayment. So, its home loan interest of 2 lakh that is mainly considered an income tax benefit for a home loan applicant."

SEBI registered expert went on to add that in the case of income tax benefit claim under Section 24(B), one has to look at how much income tax outgo he or she is saving by buying a home. He said that if a person is falling in income tax slab of 30 per cent, then buying a home to avoid income tax is advisable. However, in the case of income tax slab falling around 10 per cent to 20 per cent, one should look at buying individual mediclaim for his family including his senior citizen parents. This will enable him to claim income tax exemption on annual mediclaim premium paid up to 75,000 ( 25,000 for himself and 50,000 for senior citizen parents). Apart from this, one can go for NPS investment as well as it allows an additional income tax exemption under Section 80 CCD on investment up to 50,000 in a financial year.

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