Big Tax Benefit on Home Loan – How can you avail the benefit of Rs 3.5 lakhs

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India’s first woman Finance Minister, Nirmala Sitharaman has announced a big tax benefit to the home buyers in her debut budget by increasing the limit of deduction permitted for interest payment against a loan for self-occupied house property valued up to Rs 45 lakh. Earlier, the deduction allowed was INR 2 Lakhs in a year under section 24 of the Income Tax Act and in the announcement made in the budget 2019 by the Ministry of Finance, a new section 80EEA was introduced in which the taxpayers can get the total interest deduction of Rs. 3.5 lakhs on affordable home loans.

Features and benefits of the new home loan

  • The additional deduction is available on the loans that are taken in the period from April 1, 2019 to March 31, 2020.
  • The proposal will support the Government plans of ‘Housing for All’ and affordable housing scheme.
  • To avail the new deduction, the stamp duty value of the property needs to be less than or equal to Rs. 45 lakh.
  • The new tax benefit is only for such taxpayers who do not own any house or residential property on the date the loan is sanctioned.
  • Capital gains exemption will be provided for the profits earned by selling the residential house by investing in start-ups. The exemption can, however, be availed only up to March 31, 2021.
  • If deduction is availed by the assessee under section 80EEA, then as per the provisions of the Income Tax Act, such interest amount cannot be claimed as deduction under any other section of the Income Tax Act.
  • The additional deduction amount can be claimed only if the carpet area of the home does not exceed 645 sq ft in metropolitan cities or 968 sq ft in other cities.
  • The amount of capital gains earned from the sale of a property is required to be invested by the taxpayer within a year from the sale of property or before the due date of filing returns, whichever is earlier.
  • To claim the benefit of section 54G, it is compulsory that the startups must invest the amount in machinery and other areas specified under the act within a year from which the amount has been invested in the start-up.
  • No one can avail the full benefits of the new deduction.
  • The proposal will definitely benefit the home buyers and will increase the demand for affordable housing.
  • The proposal will also help to generate employment opportunities in the economy thus solving the problem of unemployment in India.
  • Within a period of 15 years, the benefit of Rs. 3.5 Lakh will rise up to INR 7 Lakh for the middle class home-buyers.
  • Housing has always been a necessity for everyone, so this proposal will help a number of new home buyers to buy their dream home.

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An MBA in finance, I like to cover the wide range of topics related to Taxation, SEBI, Finance and anything that is Public Helpful. The motive is always to make it simpler for the taxpayers understand the system better and take informed decisions.

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