First-time homebuyers can now claim an additional tax deduction of Rs 1.5 lakh on the interest paid on their home loan. There’s a caveat though.
Finance Minister Nirmala Sitharaman, in her budget speech, said the loan should be on a property with a stamp duty value, or circle rate, of not more than Rs 45 lakh. The benefit will be available on loans taken this financial year.
It can be claimed over and above the Rs 2 lakh deduction available under Section 24 of Income Tax Act for interest paid on home loans. Effectively, an individual can claim a maximum tax deduction of Rs 3.5 lakh.
“While this is a beneficial measure for aspiring first homebuyers, given the cap on the value of the property, individuals may not be able to utilise the entire Rs 3.5 lakh deduction available for interest payments on home loans,” said Arvind Rao, founder, Arvind Rao & Associates.
The move will give immense boost to affordable housing in tier-II cities as well as to real estate in peripheral areas of tier-I cities, said Pankaj Kapoor, managing director of Liases Foras. “Our data shows affordable units (priced less than Rs 45 lakh) contribute 53 percent of the unsold supply and 53 percent of sales across 50 cities in India.”
Interest deduction on home loan interest component for self-occupied house worth up to Rs 45 lakh increased from Rs 2 lakh to Rs 3.50 lakh till March 2020, he said.
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