Additional Deduction of Rs 1.5 Lacs on the Affordable Housing Segment
Jul 16, 2019 Home Loan
On July 5th, the first female Finance Minister of the country, Nirmala Santhiraman, rolled out the budget for the current financial year. Though the budget for the real estate sector left some developers disappointed, it also gave them reasons to cheer. The reason to cheer has been the additional deduction in the interest paid on the home loans taken for the properties worth Rs 45 Lacs. The government already offers a deduction of Rs 2 lacs and the additional deduction of Rs 1.5 lacs has definitely brought much cheer among the potential buyers.
Under the Income-tax Section 24, homebuyers can claim the homebuyer can claim for deduction on the home loan interest repayment up to Rs 2 lacs, given the property is self-occupied. The same is also applicable if the house is vacant. However, if the property is let out, then the entire interest on a home loan is allowed a deduction.
The Finance Minister in her speech said that “Interest paid on housing loans is allowed as a deduction to the extent of Rs 2 lacs in respect of the self-occupied property. In order to provide a further impetus, I propose to allow an additional deduction of up to Rs 1.5 lacs for the interest paid on loans borrowed up to March 31, 2020, for the purchase of an affordable house valued up to Rs 45 Lacs. Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to Rs 3.5 Lacs. This will translate into a benefit of around Rs 7 lacs to the middle-class home-buyers, over their loan period of 15 years.”
The Reserve Bank of India has bought down the repo rates to a record low by implementing a reduction in the rates three times in the last two years. The new deduction will boost the home buyers who have been waiting for the price correction in the real estate sector to invest in the property which will boost the sales.
Currently, the RBI’s repo rate is 5.75 which are the lowest in past nine years. Following the RBI’s move, several banks have reduced their marginal cost of funding based lending rates.
However, not everything has been addressed in the budget that the homebuyers and the developers were hoping for. Apart from the limit of tax exemption increasing from Rs 2.5 lacs to Rs 5 lacs, the homebuyers were expecting the increase in the upper limit of deduction in the Section 80C of the Income tax act. Under this section, the stamp duty and the registration charges that the home buyers have to pay are allowed deduction with the upper limit being Rs 1.5 Lacs. The home buyers were expecting the increase in the upper limit of the same but were met with disappointment. Even under Section 80EE, the upper limit should have been raised to Rs 2 lacs but it was not granted.
Under the Income-tax Section 24, homebuyers can claim the homebuyer can claim for deduction on the home loan interest repayment up to Rs 2 lacs, given the property is self-occupied. The same is also applicable if the house is vacant. However, if the property is let out, then the entire interest on a home loan is allowed a deduction.
The Finance Minister in her speech said that “Interest paid on housing loans is allowed as a deduction to the extent of Rs 2 lacs in respect of the self-occupied property. In order to provide a further impetus, I propose to allow an additional deduction of up to Rs 1.5 lacs for the interest paid on loans borrowed up to March 31, 2020, for the purchase of an affordable house valued up to Rs 45 Lacs. Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to Rs 3.5 Lacs. This will translate into a benefit of around Rs 7 lacs to the middle-class home-buyers, over their loan period of 15 years.”
The Reserve Bank of India has bought down the repo rates to a record low by implementing a reduction in the rates three times in the last two years. The new deduction will boost the home buyers who have been waiting for the price correction in the real estate sector to invest in the property which will boost the sales.
Currently, the RBI’s repo rate is 5.75 which are the lowest in past nine years. Following the RBI’s move, several banks have reduced their marginal cost of funding based lending rates.
However, not everything has been addressed in the budget that the homebuyers and the developers were hoping for. Apart from the limit of tax exemption increasing from Rs 2.5 lacs to Rs 5 lacs, the homebuyers were expecting the increase in the upper limit of deduction in the Section 80C of the Income tax act. Under this section, the stamp duty and the registration charges that the home buyers have to pay are allowed deduction with the upper limit being Rs 1.5 Lacs. The home buyers were expecting the increase in the upper limit of the same but were met with disappointment. Even under Section 80EE, the upper limit should have been raised to Rs 2 lacs but it was not granted.
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