The Indian Government rewards you for your home loan with ample tax benefits on home loan. Being a long-term commitment, gaining an upper hand with tax benefits will help you make the most of your finances, without letting the home loan weigh down your income. Every year, with the Union Budget small yet significant changes in tax laws are proposed to give the taxpayer a breather. This year’s Budget also revealed some promising tax benefits on home loan.
Here is what the new tax rules entail.
Revised tax benefits on home loan
In case you are planning to buy a home that qualifies for the affordable housing scheme, and planning to take a home loan of Rs.45 lakh or less, you qualify for an additional deduction under Section 80EEA of the Income Tax Act. Here you can get a deduction of up to Rs. 1.5 lakh for the interest you pay for the affordable housing. Keeping in view the reducing consumer pocket size and in order to boost consumption, the finance minister Nirmala Sitharaman announced a list of tax benefit on home loan and other benefits for home buyers in Budget 2021. The tax exemption on affordable housing was initially declared in the July 2019 Union Budget. The government has further revised the home interest supplementary deduction of up to Rs. 1.5 lakh for home loans used to purchase an affordable housing to 31 March, 2022.
How does this benefit you?
In order to understand the bigger benefit of this scheme, you must first understand the criteria to receive this tax benefits on home loan. The houses priced under Rs. 45 lakh comes under the affordable housing domain. If you are planning to invest in such a home that qualifies under affordable housing scheme then you are eligible to get an additional income tax deduction of up to Rs. 1.5 lakh. This is over and above the exemption you can claim under Section 24 of the Income Tax Act of up to Rs. 2 lakh on home loan interest rates.
So, buying an affordable home will fetch you a total tax exemption of up to Rs. 3.5 lakh on home loan interest rates. This is a big exemption for a new homebuyer and will help you save a lot annually. Apart from home interest, you can also claim tax benefits on home loan basis the principal repayment of under Section 80C of the Income Tax Act. You can claim up to Rs.1.5 lakh every year under this slab.
Added to all these benefits, as a first-time homebuyer you can avail an additional exemption on the home loan interest rates of up to Rs. 50,000 under Section 80EE. The sum total of these benefits on an affordable house will definitely help you save a lot on your repayment every year.
What other housing benefits did the center propose?
The government, understanding the plight of citizens owing to the pandemic, announced the extension of tax holiday for one more year on affordable rental housing projects. The Budget 2021 has allowed deduction under section 80-IBA of the Income Tax Act to rental housing projects that is earmarked by the Central Government in the Official Gazette as affordable rental housing projects.
This apart, keeping alive the momentum of ‘Housing for all’ the Budget 2021 also offered tax exemptions to developers constructing affordable rental housing project. As per the existing provision prescribed under the section 80-IBA of the Income Tax Act, if the gross total income of the taxpayer includes profits derived from the business of developing and building affordable housing project, then they will be allowed a deduction of an amount equal to 100% of these profits derived from such business of affordable housing projects. This further boosts the confidence of the developers and encourages them to invest in more affordable housing projects.
With Budget 2021 bringing tax benefits on home loan, choose a lender of your choice and apply for a competitive interest home loan right now to make your dream of owning a home a reality.
