The Central Government has already given a major fillip to the housing sector throughout the last few years by focusing on affordable housing. In fact, affordable housing has proved to be a major savior for Indian real estate along with mid-income housing which is also drawing the attention of prospective buyers. In this regard, efforts have been made to encourage more potential home buyers to apply for home loans across financial institutions with a plethora of incentives and benefits.
The Pradhan Mantri Awas Yojana (PMAY) has already provided for major interest subsidies on home loans in the affordable segment. Additionally, the Reserve Bank of India (RBI) has implemented several repo rate cuts with a view towards making home loans cheaper for borrowers. This has resulted in home loans being offered at their lowest interest thresholds in several years, something that has already attracted many prospective buyers and fence sitters to the property market. The Union Budget 2020-21 continues this thrust on the affordable housing sector by extending previously announced benefits on home loans further.
Timeline increased for getting added interest benefits on affordable housing loans
The Union Finance Minister, Nirmala Sitharaman, has already proposed an extension of the date for getting affordable housing loans under the previously announced scheme till the 31st of March, 2021. The present deadline for availing these home loans is the 31st of March, 2020. In the Union Budget for 2019, presented in July, the Finance Minister proposed an increase in the eligibility for tax benefits on interest repaid on housing loans from Rs. 2 lakh to Rs. 3.5 lakh. However, this would only be applicable for those buying homes under the affordable housing scheme, i.e. for properties priced up to Rs. 45 lakh in stamp duty value.
This added benefit of Rs. 1.5 lakh has certainly encouraged many home buyers to apply for loans and the extension will be beneficial for the real estate sector as well. The 2020-21 Union Budget has now extended this deduction under Section 80EEA till the end of the upcoming financial year. This will naturally help the Government fulfill its mission of Housing for All by 2022 while offering a major boost to the real estate sector in turn. Based on income tax regulations, individual taxpayers can claim deductions on the interest repaid annually on home loans from the gross total income.
The extension will benefit first-time home buyers from the middle classes who will get this extra tax benefit of Rs. 1.5 lakh on housing loan interest. It will also spark renewed interest in affordable housing units which are priced up to Rs. 45 lakh. The present income tax rules enable multiple tax deductions and benefits for housing loans, depending on the type of the property, i.e. whether it has been let out or self-occupied. For homes in the latter category, borrowers can get tax benefits on the principal repayment for the home loan along with interest under Section 80C and Section 24 respectively. The maximum deduction under Section 80C is Rs. 1.5 lakh while it is Rs. 2 lakh under Section 24. These deductions can be claimed from the gross total income prior to calculating the taxes payable by the individual.