Budget 2019: 5 conditions before you can avail additional tax benefit on home loan interest

Union Budget 2019 India : The FM has proposed an additional deduction of Rs 1.5 lakh for the interest paid on the home loan for residential house property. Currently, the interest paid on home loan up to Rs 2 lakh in a year for a self-occupied property qualifies for deduction under section 24 of the I-T Act. The additional interest will qualify for deduction under the newly introduced section 80EEA. The total amount of deduction available to the taxpayer will, therefore, become Rs 3.5 lakh a year. “This will translate into a benefit of around 7 lakh to the middle class home-buyers over their loan period of 15 years”, said the FM in her Budget speech.

But, remember there are certain conditions to be fulfilled before you can claim deductions under both the sections.

(i) Loan to be sanctioned by the financial institution during the period beginning on the 1st April, 2019 to 31st March 2020

What it means: The tax benefit will not be on an existing loan taken before March 31,2019.

(ii) The stamp duty value of house property should not exceed Rs 45 lakh

What it means: The registration price of the home is restricted to Rs 45 lakh. Other than cities like Mumbai etc, a 2bhk will be available in several locations at this price. If you are looking to buy a home costing more than this amount, you will not be eligible to claim any deduction under this section.

(iii) The assessee does not own any residential house property on the date of sanction of loan

What it means: It means, the objective of introducing this new tax benefit is aimed at new buyers who don’t have a home now.

(iv) If you have already availed a deduction under this section, same interest amount cannot be availed under any other section of the I-T Act

What it means: It means, tax benefit on the same interest cannot be claimed under section 24 and section 80EEA at the same time. However, for the amount exceeding the limit, one can claim under both sections.

(v) You will be eligible for deduction under the section, if the carpet area of your home is not exceeding 60 square meter ( 645 sq ft) in metropolitan cities or 90 square meter (968 sq ft) in cities or towns other than metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida,Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region). Further, this definition will be effective on or after 1st day of September, 2019.

What it means: Carpet area is about 30 per cent less than super carpet area. If you are looking for a bigger house exceeding about 1000 sq ft in metropolitan cities or 1350 in other cities, this proposal may not help you much. The government needs to relax the area limit to make the proposal workable.

Also, what if a loan is taken in FY 2019-20 and the interest portion exceed Rs 1.5 lakh, can deduction be availed in both sections? “On the purchase of an affordable house, an individual can avail a deduction of Rs 2 lakh under section 24 of the income tax act and also, an additional deduction of Rs 1.5 lakh under section 80EEA, provided the loan is taken from any financial institution. Therefore, if a loan is taken for in FY 2019-20 but interest portion exceeds Rs 1.5 lakh, the person can claim benefits under both the sections i.e. 24 & 80EEA and take a total deduction to Rs 3.5L,” informs Archit Gupta, Founder & CEO ClearTax.

So, if you have found your right home and are planning to take a home loan especially to take advantage under the new proposal, tread carefully.

Leave a Reply

Your email address will not be published. Required fields are marked *