Budget 2019 Shines Small Ticket Home Loans: Now Save Up to 3.5 L on Interest
Union Finance Minister Nirmala Sitharaman brings a much-awaited boost to the housing sector and middle-class mortgage borrower by introducing additional deduction of Rs 1.5 Lakh on paid-up interest on Home Loans for affordable residential properties. In effect, the total tax break on paid-up interest of small-ticket Home Loan will be Rs 3.5 Lakh per annum as against the previous capping of Rs 2 Lakh.
The affordable houses are essentially the residential properties that are valued up to Rs 45 Lakh. To ensure that the impetus to make housing loan affordable swiftly rolls out to the end user, the FM has added a timeline to tap the tax relief. The additional deduction is available only on Home Loans applied till March 31, 2020.
This is certainly a step in the direction of the central government’s promise of ‘Housing for all by 2022.’ Already developers of affordable housing are enjoying a tax holiday, and this additional 1.5 Lakh rebate to consumers should attract a slew of new consumers.
FM said in the Union Budget speech: I propose to allow an additional deduction of Rs 1.5 Lakh for interest paid on loans taken up to 31st March 2020. This will translate into the benefit of Rs 7 Lakh to the middle-class home buyers over a loan period of 15 years.
The proposal is expected to bring relief to the first time home buyers, who are also middle-class home loan borrower as they would be able to save up to Rs 1.5 Lakh income rebate over the existing deduction of Rs 2 Lakh for 15 years.
Currently, a Home Loan borrower can avail a tax benefit on both the principal as well as the interest repayment components. Under Section 80C of the Income Tax Act, an assessee can avail a deduction of up to Rs 1.5 Lakh on repayment of home loan principal amount and up to Rs 2 Lakh per annum on interest payment under section 24. These deductions significantly reduce the total tax payable income and make home loan an attractive rider for buying a dream home.
The additional benefit of Rs 1.5 Lakh on small ticket home loans will thus make dream home more affordable for the first time and middle-class buyers, and ease the struggling real estate market with the movement of affordable units at a better pace.