By introducing an additional deduction of Rs 50,000 in the Budget 2016 proposal, Finance Minister Arun Jaitley has given some reason to cheer to the first time home buyers.
This additional deduction has been given on interest for loan up to Rs 35 lakh, provided the house value doesn’t exceed Rs 50 lakh.
An additional deduction was much awaited as the costs of housing units have increased much over the recent years.
A home buyer in India is entitled to claim both the interest and principal components of home loan repayments for tax benefits. Currently interest payable on a ‘self-occupied’ house is subject to a maximum deduction of Rs 2 lakh under the head ‘Income from House Property’.
Tax experts and home buyers were also urging the government to look at carving out a separate deduction for principal re-payment of housing loan, as the principal paid is currently clubbed under Section 80C with other tax-saving instruments, which effectively does not provide significant tax relief to the home buyer. The demand, if met, would leave behind a higher disposable income in the hands of the borrowers of home loans and also encourage investment in the realty sector.