In July 5 Union Finance Minister Nirmala Sitharaman placed the budget. Among the many announcements that drew thunderous ovation was the proposal to raise the tax deduction limit on home loans.
The finance minister raised the tax deduction limit to Rs 3.5 lakh from the existing Rs 2 lakh on a home loan worth a maximum Rs 45 lakh. The move is seen by many to give affordable housing under the Housing for All scheme a leg up.
Here are some important points to note about the hike in home loan tax break:
The deduction can be availed only by individuals. Co-operative societies, undivided Hindu families, companies or firms will not be eligible for the deduction.
Only a first-time homeowner is eligible for the deduction. Individuals who already own a home have been kept out of the ambit of the enhanced limit.
There is an upper cap on the price of the house — Rs 45 lakh. This has been done to promote affordable housing and limit the benefits to the middle class. Moreover, the loan has to be taken from a bank or a government-recognised housing finance company.
The carpet area of the property should not be more than 60 sqm / 645 sq ft (up from 30 sqm) in cities like Delhi-NCR, Bengaluru, Mumbai Metropolitan Region, Chennai, Kolkata and Hyderabad. For other cities or towns, the carpet area is a maximum of 90 sqm (968 sq ft).
The tax deduction can be availed of under the newly introduced Section 80EEA from FY 2019-20 (AY2020-21).
Both resident Indians and non-resident Indians (NRIs) can claim the deduction.