Affordable housing: Low ceiling on value limits income tax benefits from home loans
The Rs 3.5 lakh of deduction available for affordable housing made sense when the interest rates on home loans were 8-9 percent
There was good news for the first time home-buyers looking for an affordable house costing up to Rs 45 lakh. Finance Minister Nirmala Sitharaman extended the tax benefits under Section 80EEA of the Income Tax Act, 1961, by one more year till March 2022.
Be that as it may, in the current low interest rate scenario and the rule governing the amount of loan sanctioned for a house, will a property buyer be able to take full advantage of this extension? The answer is a no. Here’s why.
The criteria and deduction
Under Section 80EEA, a homebuyer purchasing a residential property of up to Rs 45 lakh is entitled to get additional tax benefit of Rs 1.5 lakh on payment of interest on the home loan. This will be in addition to the Rs 2 lakh available under Section 24 (b). So, the total tax exemption on payment of interest on home loan goes up to Rs 3.5 lakh.