The first budget of the Narendra Modi-led 2.0 government brought more relief and benefits to the housing sector. The budget speech presented by the Finance Minister Nirmala Sitharaman in Parliament on July 5, 2019, announced an additional income tax deduction to home-buyers in the affordable housing category.
Take a look at the noteworthy announcement on the housing sector and home loans:
Union Budget 2019 announced an additional deduction of up to ₹ 1.5 lakh for interest paid on the already benefit of deduction of up to ₹ 2 lakh provided by the government.
Hence, the total amount to be deducted will now be ₹ 3.5 Lakh in taxable income.
This facility is valid up to March 31, 2020. Therefore, homebuyers should borrow home loans within the mentioned date.
The deduction of ₹ 3.5 Lakh for interest on the home loan is applicable on only those properties worth up to ₹ 45 lakh for self-occupying.
What are the conditions for homebuyers to claim ₹ 3.5 Lakh income tax deduction against home loans?
Only individuals qualify for this benefit. He/she should be a first-time homebuyer who should not be owning any residential property.
Taxpayers who belong to Hindu Undivided Family (HUF), Association of Persons (AOP), Partnership firm, a company, and others are excluded from this benefit.
One should apply for a loan from a financial institution or a housing finance company for buying a residential property.
How should an individual proceed further to claim the additional deduction?
If the homebuyer can fulfill the conditions of both Section 24 and Section 80EEA of the Income Tax Act, he/she can claim the additional deduction benefits.
Section 24 of the Income Tax Act in India allows homebuyers to claim a deduction of up to ₹ 2 lakh on their home loan interest if the owner or his family reside in the house property or the house is vacant. In case of renting the property, the entire interest on the home loan is allowed as a deduction.
The existing Section 80EE allows a deduction up to ₹ 50,000 for interest paid by first-time homebuyers for loan sanctioned from a financial institution. To further boost the benefit, the government in its Union Budget 2019 introduced Section 80EEA in the Act to provide a deduction of up to ₹ 1.50 lakh for interest on loan taken from any financial institution. Section 80EEA also applies the condition that the stamp duty value of a residential house property should not exceed ₹ 45 lakhs.
Who will benefit from the ₹ 3.5 Lakh income tax deduction?
Little will be beneficial to the Metropolitan and Tier-1 cities, considering the high prices of real estate properties which usually goes beyond the mark of ₹ 45 Lakhs.
The direct beneficiaries of this facility will be the middle-class population and Tier-2 and 3 cities.
This initiative by the government will help to boost the mission of Housing For All by 2022 and providing affordable housing. As Sitharaman highlighted the completion of about 1.5 crore homes under Pradhan Mantri Awas Yojana during her speech, 2.0 Modi-led government focuses on completing about 1.95 crore proposed houses in the second phase of PMAY.