Would you like to benefit from tax advantages on affordable housing? You have little time left to sanction a mortgage
By fulfilling the u/s 80EEA conditions, a home buyer can obtain a deduction of up to Rs 3.5 lakh (Rs 2 lakh u/s 24 and Rs 1.5 lakh u/s 80EEA) on interest paid on the home loan.
In addition to getting a deduction of up to Rs 2 lakh from taxable income under Section 24 of the Income Tax Act, buyers of affordable housing are eligible for the additional tax deduction of Rs 1 .5 lakh under Section 80 EEA – provided that the value of the property of the house must not exceed Rs 45 lakh and the carpet area of the property of the house must not exceed 60 square meters (645 square feet) in the metropolitan cities of Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (entire Mumbai metropolitan area), while in all other cities or towns, the carpet area should not exceed 90 square meters (968 square feet).
So, by fulfilling the u/s 80EEA conditions, a home buyer can get a deduction of up to Rs 3.5 lakh (Rs 2 lakh u/s 24 and Rs 1.5 lakh u/s 80EEA) on interest paid on the home loan. However, unless further extended, the benefit can only be used on home loans sanctioned on or before March 31, 2022.
“Thus, from the start of 1 April 2022, buyers would no longer be eligible for the additional tax benefit of Rs 1.5 lakh under Section 80 EEA of the Income Tax Act 1960 , which is currently available for affordable housing. So if you’re looking to buy a home that meets the Sec 80 EEA eligibility requirements, it’s a good idea to get your home loan approved before the March 31 deadline and then wait for disbursement,” said Pramod Kathuria – Founder and CEO, Easiloan.
“Several sections of the Income Tax Act allow the buyer of a home to save tax on the interest and/or principal amount. In some respects, this is a move by the government to enable the purchase of a home and ease the burden on the borrower,” he added.
According to Kathuria, some of the tax saving provisions are –
- Tax relief on principal amount under 80C (up to Rs 150,000 and tax deduction under Section 24(b) on interest paid (up to Rs 2 lakh for self employed and total amount under repayment for properties rented).
- Deductions are also available under Sections 80 EE and 80EEA, which have been in effect for a few years.
- 80EE allows an additional deduction of Rs 50,000 on top of section 24(b) for home loans sanctioned in the financial year 2016-17.
“80EEA and one of my favorites as it directly enables affordable housing – An additional deduction of Rs 150,000 on top of section 24(b). This applies to first time home buyers and a value of transaction less than Rs 45 lakh. Also, it cannot be clubbed with 80E. As you can see, this is a huge and clearly defined benefit to support the affordable first time home buyer. D ‘where a nice move that started in the 2019 budget and has continued every year since. Importantly, this also covers property under construction, unlike section 24(b) which covered those whose possession was received,” Kathuria said.
“Now the central government will not be renewing this sop beyond March 31, 2022. Therefore my advice to potential buyers (under affordable housing) is that if you are sure you are buying a house at any time in the next fiscal year (fiscal year 2022-23), then opt for a home loan sanction by the end of that fiscal year (before March 31, 2022) This sanction will allow you to take advantage of the benefits of the article 80EE A and for the full term of your home loan. Additionally, you can request a disbursement at any time until March 31, 2023,” he added.
“This is a good hack to make sure you don’t miss out on this benefit. Of course, the usual conditions under 80 EE A as mentioned before apply. Plus, in my opinion, a home loan sanction before locking home is always a good decision – it signals you are a serious buyer and gives you negotiating leverage,” Kathuria added, adding, “Also, if you have already locked in that dream home, you should go for the closing of the sanction of the mortgage loan before March 31, 2022.
“Just in case you are strayed from the entire home buying and home loan application, you don’t have to worry about missing out on this opportunity. There are 80EE and other sections as mentioned earlier Also, affordable housing is a priority area for our government, so always be optimistic about a new benefit in the future,” Kathuria suggested.