Explanation of the Income Tax Relief on a Home Loan within Affordable Housing


The drop in interest rates on home loans to 7 percent (interest rate on home loans SBI starts at 6.70 percent per annum) is good news for home buyers as it will result in lower monthly EMIs. However, if the buyer of the house buys an apartment for a lower price 45 lakhs, then he or she can claim additional Income tax exemption of 1.5 lakh on interest payments on a home loan under Section 80EEA. This income tax benefit is provided in addition to Payment of interest on a home loan of 2 lakhs under section 24 (b) of the Income Tax Act 1961. However, the question arises whether a new borrower on an affordable home loan will be able to claim income tax exemption up to the maximum limit. 3.5 lakhs? According to tax and investment experts, the answer is no, because The upper limit of the home loan amount of 45 lakhs prevents a new home loan borrower from claiming the maximum amount. The exemption limit is 3.5 lakhs under the current home loan interest rate regime.

Home Loan EMI Calculation

Highlighting the inconsistency between The upper limit of affordable housing on a home loan of 45 lakhs and current interest rates on a home loan Amit Gupta, Co-Founder and Managing Director of SAG Infotech, said: “To take full advantage of the tax incentive, i. 3.5 lakh, home buyers need to take out a 90 percent home loan that is valued at 45 lakhs for a period of 20 years at a rate of 9 percent. Then only the new home loan borrower will be able to fully use the limit. Deduction of 3.5 lakhs. “

The Managing Director of an income tax service provider registered by SEBI added: “The prevailing home loan rates reflect a different picture – current interest rates for affordable housing are almost 7 percent or less, or about 200 basis points lower than 9 percent – it is a requirement for affordable housing. Consequently, the home buyer cannot fully utilize the margin of the income tax benefit. ”

What’s the solution

Calling attention to the required solution, Kartik Javery, Director of Capital Management at Transcend Consultants, said: “The idea behind providing additional The 80EEA Section 80EEA income tax relief was intended to support India’s housing sector by increasing demand for affordable housing. The idea worked to some extent as well, but the new home loan borrower should be aware that a lower home loan could lead to faster principal repayments, since a lower EMI home loan would allow them to keep the loan term lower, could instead be 15 years. traditional 20 years. They should also bear in mind that the lower home lending regime will not last long, and therefore, during this time, the Indian government should consider increasing the The available home loan limit is 45 lakhs to ensure that borrowers get the most out of this scenario of a lower interest rate on a home loan. ”

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