Claim Income Tax Benefit On Home Loan

Income Tax Benefit On Home Loan

Deduction of Interest paid on Home Loan for Affordable Housing



Do you know you can save 3.5 lakhs on your dream home.

“Housing for all” is the Dream Project  launched by PM Shri Narendra Modiji in 2015 under National Mission for Urban Housing, with only one mission to provide House to every citizen of the Country. Under the above objective, the government has now extended the interest deduction allowed for low-cost housing loans taken during the period between 1 April 2019 and 31 March 2020. Along with the existing Section 80EE that a new Section 80EEA has been inserted to allow for an interest deduction from AY 2020-21 (FY 2019-20). The existing provisions of Section 80EE allow a deduction up to ₹50,000 for interest paid by first-time home buyers for loan sanctioned from a financial institution. With a view to extend the benefit and give boost to the real estate sector, the government has extended the benefit for the FY 2019-20. This deduction can be claimed until you have repaid the housing loan.

Let us discuss the features of this Section.

1. Features of Section 80EEA

a) Eligibility criteria

The deduction can be claimed only by the individuals under this section. Any other taxpayer cannot avail any deduction. This means, if you are a HUF, AOP, Partnership firm, a company, or any other kind of taxpayer, you cannot claim any benefit under the section 80EEA.

b) Amount of deduction

An individual can avail the deduction for interest payments up to ₹1,50,000 under Section 80EEA. This deduction is over and above the deduction of ₹2 lakh for interest payments available under Section 24 of the Income Tax Act. Therefore, taxpayers can claim a total deduction of ₹3.5L for interest on home loan, if they meet the conditions of section 80EEA.

c) Other conditions

In order to claim deduction under Section 80EEA, an individual should not own any other house property on the date of the sanction of a loan.

Now the question comes How to Claim this Deduction? Are there any conditions for claiming the deduction? Let us see below

2. Conditions for claiming the deduction

  • An individual must take the housing loan from a financial institution or a housing finance company for buying a residential house property.
  • The Registration value of the house property should be ₹45 lakhs or less. The Stamp duty value of the house should be ₹45 lakhs or less.
  • Under the existing Section 80EE, the individual taxpayer should not be eligible to claim deduction.
  • The deduction can only be claimed only if the taxpayer is first-time home buyer. The taxpayer should not own any residential house property as on the date of sanction of the loan.

Apart from the above conditions which are with respect to taxpayer individual there are also conditions with respect to the carpet area of the house property. These conditions have been specified in the memorandum to the finance bill, but not mentioned in section 80EEA:

  • The Carpet area of the house property (remember the carpet are neither built-up area nor super built-up area) should not exceed 60 square meter ( 645 sq ft) in metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region)
  • For cities other than the one mentioned in the above appoint Carpet area should not exceed 90 square meter (968 sq ft).
  • Further, this definition will be effective for affordable real estate projects approved on or after 1 September 2019

Section 80EEA has been introduced to further extend the benefits allowed under Section 80EE for low-cost housing. Earlier, Section 80EE had been amended from time to time to allow a deduction for interest paid on housing loan for the FY 2013-14, FY 2014-15, and FY 2016-17. In the section 80ee it is not specified if you need to be a Resident to be able to claim this benefit. Therefore, it can be concluded that both Resident and Non-Resident Indians can claim this deduction. The section also does not specify if the residential house should be self-occupied to claim the deduction. So, borrowers living in rented houses can also claim this deduction. If the property is owned jointly by husband and his spouse and loan instalments are being paid by both of them, then the deduction can be claimed by both of them. However, all the conditions must be satisfied in order to claim.

 

3. Section 80EEA and Section 24

Under Section 24, a homeowners can claim a deduction for interest payments up to ₹2 lakh on their home loan, if the owner or his family resides in the House Property. Also the deduction of upto ₹2lakhs can be claimed even if the house is vacant. If the property has been rented out, the entire home loan interest is allowed as a deduction. This concludes that, if an individual is able to satisfy the conditions of both Section 24 and Section 80EEA of the Income Tax Act, they can claim the benefits under both the sections. That is, ₹2 lakh under section 24 of Income tax & then claim the additional benefits under Section 80EEA. Thus a an individual can save upto ₹3.5lakhs on Income Tax on Interest paid on Home loan.

Constant measures have been taken by the government to boost the real estate sector. The more relaxation in terms of lower home loan rate, rebate from Income tax , lower registration cost etc given more the people will be influenced towards buying property for living or investment. The encouragement by the government is to let people buy a house and keep their future secured and safe.

For Property buying help in Kolkata , Visit 510earth real estate agents kolkata or Call 8336992745 for free consultation.

References

Cleartax.in

Incometax.gov.in



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