Budget 2021: Expectations & Impact on Your Home Loan EMIs

FM Sitharaman has presented the much awaited Union Budget on February 1, 2021. Sector wise expectations were high for policy reforms and boost to the consumption for getting the economy back on the track. Despite lowest ever home loan interest rates and fall in property prices of ready-to-move-in properties, the real estate sector sought support from the FM.

Rightly so, the finance minister has ensured buoyancy in demand & supply of housing projects by sharing some steps to boost affordable housing & rentals. The FM has offered relief on Home Loan EMI payments.

Budget 2021 Offers Boost to Affordable Housing

In Union Budget 2021, FM N. Sitharaman has extended Rs 1.5 lakh additional benefit on interest paid for affordable housing loans for one more year. That is, you can avail of additional deduction under section 80IBA of the Income Tax Act till March 31, 2022. Thus, a home loan availed of till March 2021 under the affordable segment will be eligible for additional deduction on interest repayment of home loan.

All home loan borrowers are eligible for tax deduction for home loan principal payment up to Rs 1.5 Lakh under section 80C and up to Rs 2 Lakh u/s 24b. This is additional deduction limit on interest payment and was introduced in Budget 2019.

FM in her budget speech said: The government saw ‘Housing for All’ and affordable housing as priority areas. I propose to extend the eligibility of this deduction by one more year, to 31st March 2022.

She further added that affordable housing projects can avail a tax holiday for one more year – till 31st March, 2022 and this will help keep up the supply of affordable houses. She said: We are committed to promote supply of Affordable Rental Housing for migrant workers. For this, I propose to allow tax exemption for notified Affordable Rental Housing Projects.

The steps to boost affordable housing are welcomed by the Industry and borrowers. The contribution of real estate sector is close to 8% to the GDP. It is one sector that can help support other ancillary sectors on the growth path. By incentivising new and existing home loan borrowers, government can boost demand & significantly help reduce the stress of real estate sector which was already crippled due to unsold inventory prior to COVID.

Pre Budget Expectations of Home Loan Borrowers from Budget 2021

Credit linked subsidy under Pradhan Mantri Awas Yojana (PMAY)

Extend last date for availing Pradhan Mantri Awas Yojana (PMAY) Credit-Linked Subsidy Scheme (CLSS) for MIG-I & MIG-II in lines with LIG/EWS category to March 31, 2022. In present Covid stressed times, each home loan aspirant desires some saving. Presently the last date for MIG segment is March 31, 2021. PMAY CLSS is Rs 2,35,068 and Rs 2,30,156 for the MIG-I and MIG-II respectively.

Tax rebate on home loan interest repayment under section 24

Under Section 24 of the Income Tax Act, home loan borrowers get a tax deduction up to Rs 2 lakh on interest repayment for a self-occupied property. The home loan borrowers want extension in this limit.

Additional tax benefit under Section 80 EEA

According to the last update, the FM N Sitharaman had extended the tax benefit on interest payment for new borrowers of affordable units for home loans booked between April 1, 2019 to March 31, 2021. Under Section 80EEA, these borrowers were granted an additional deduction of up to Rs 1.5 lakh on home loan interest payment, over and above the existing deduction u/s 24. To avail the benefit, the value of unit should be Rs 50 lakhs or less and the loan amount should be Rs 35 lakhs or less.

To truly extend these tax benefits to the larger base of customers and boost the housing loans, the additional interest deduction should be offered to all units and the capping on value of property should be erased.

Some other expectations are expansion of tax relief under section 80C and uniform GST for builders of under construction units so as to boost housing in all. With lower costs, builders will be able to offer more affordable units to end customers and transfer the benefit to end user only.

FAQs

What is the date of Union Budget 2021?

Finance Minister N Sitharaman will present Union Budget 2021 on February 1, 2021 in the budget Session of Parliament at 11 am.  The Budget session commences on January 29 and will close on February 15. President Ram Nath Kovind will address both houses of the Parliament on January 29 prior the beginning of the Budget Session.

What is special about Budget 2021?

Budget 2021 will be presented by FM Nirmala Sithraman on February 1, 2021 digitally. This is the first ever digital budget presentation. Also, the budget will address contracted GDP for the first time in the history of Independent India.

What was the theme of the Union Budget 2021?

The theme of Union Budget 20-21 was ‘Ease of Living.’

What are the top expectations from budget 21-22?

After disruptions caused due to COVID in FY 20-21, the key expectations from budget 21-22 are the boost to demand and consumption, thereby driving sustainable road map for intra sector growth for good of overall economy.

Also Read: 6 Pillars of Union Budget 2021 and Their Inclusions