Source : The Economic Times | Dated : Feb 25, 2021
Finance minister Nirmala Sitharaman in her Budget 2021 speech has proposed to extend the timeline for availing home loan by another year for claiming additional deduction on interest payment on such home loans to March 31, 2022. Currently, the deadline for this March 31, 2021.
“With the objective of ‘Housing for All’ the FM extends the benefit of additional interest deduction of Rs 1.5 lakh for small taxpayers to purchase affordable housing by one more year,” says Shalini Jain, Tax Partner – People Advisory Services, EY India.
Amit Raj Jain, Head of Sales, BPTP Ltd. says, “With its continued focus on ‘Housing for All’, the budget has extended tax holiday for affordable housing projects by one year and also extended additional interest deduction of Rs 1,50,000 on home loan for first-time homebuyers till March 2022. Amid the lower interest regime, these measures will certainly boost demand for affordable housing.”
Ramesh Nair, real estate industry veteran and former CEO of JLL India says, ”Positives for the real estate sector include extension of Rs 1.5 lakh additional deduction by 1 more year for affordable housing, tax holiday for affordable housing extended by one more year and new tax incentives for affordable rental housing for migrant workers.”
The deduction of Rs 1.5 lakh in a financial year is available under section 80EEA of the Income-tax Act, 1961. Deduction on payment of interest on a housing loan was introduced in Budget 2019. This deduction is available over and above the Rs 2 lakh deduction available on the interest payment on housing loan subject to certain conditions. Thus, the total deduction available to an individual taxpayer on the interest payment of a housing loan for buying an affordable house is Rs 3.5 lakh in a financial year.
To avail the tax benefit under this section, certain conditions have to be fulfilled which are as follows:
- Housing loan must be taken from a financial institution such as a bank or a housing finance company for buying a residential house property.
- The home loan must be taken between April 1, 2021 and March 31, 2022.
- Stamp duty value of the house property should not exceed Rs 45 lakhs.
- The individual taxpayer should not be eligible to claim deduction under the existing Section 80EE.
- The taxpayer should not own any residential house property as on the date of sanction of the loan.
This deduction on interest payment is available from gross total income of the taxpayer thereby reducing the tax liability of an individual taxpayer.
At present, for a self-occupied house, one can avail deduction on the principal amount repaid on the home loan as well as the interest paid on it. Under section 80C of the Income-tax Act, you get a deduction for the principal(of the loan) repaid up to Rs.1.5 lakh a year and the interest paid is deductible up to Rs 2 lakh per annum under section 24.
The recent budget has offered a bigger impetus for homebuyers with the massive tax cut for affordable housing. The deal has been sweetened with the additional interest allowance of Rs 1,50,000 for first-time homebuyers (valid until March 2022). For those who were waiting for the right time to lay hands on their dream homes at KG Earth Homes and KG Centre Point, know that the lower interest rates and the added impetus’ mean the doors of opportunity have been further nudged open in your favour. Wait no more!