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Huge Tax Benefits For Home Buyers

IndianMoney.com Research Team | Updated On Tuesday, February 11,2020, 12:42 PM

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Huge Tax Benefits For Home Buyers

 

 

Finance Minister Nirmala Sitharaman presented the Union Budget 2020 on February 1st 2020. This Budget had a tax bonanza for home buyers. This cannot be a better time if you are looking for that first house. Real Estate prices are down. Banks are cutting home loan rates.

SBI and Bank of India have cut MCLR. SBI has reduced MCLR from 7.9% to 7.85%. Bank of India has cut MCLR by 10 bps. This is for maturities up to 6 months. MCLR is the minimum rate below which the bank cannot lend.

What did the Union Budget 2020 have for first time home buyers? Let’s find out. Want to know more on Home Loans? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

Huge Tax Benefits For Home Buyers

Home Loan Tax Benefits Under Section 80EEA

You get a deduction on home loan interest payments under Section 80EEA up to Rs 1.5 Lakhs a year. This is over and above the existing home loan interest deduction of Rs 2 Lakhs a year under Section 24. This is a total deduction of Rs 3.5 Lakhs a year on home loan interest repayments. The Finance Minister has extended the Section 80EEA benefits till March 31st 2021.

See Also: How to Select The Best Home Loan in India? What Should I Consider?

Conditions for Claiming Section 80EEA Tax deduction:

  • The home loan must be availed from a financial institution (Bank or NBFCs) or a HFC. (Housing Finance Company).
  • The stamp duty of the house must not exceed Rs 45 Lakhs.
  • You must not claim tax deduction under Section 80EE on home loan interest.
  • You must be a first-time home buyer and not own any other residential house property on the date of home loan sanction.

Developers Enjoy Section 80-IBA Benefit:

You and other home buyers indirectly benefit from the tax holiday builders get from affordable housing below Rs 45 Lakhs. The Section 80-IBA tax benefit has been extended up to March 31st 2020.

See Also: 5 Tips to Improve Your Home Loan Eligibility

Tax Benefits on Home Loan

  • You get tax benefits on home loan principal up to Rs 1.5 Lakhs a year under Section 80C.
  • You get tax benefits on home loan principal up to Rs 2 Lakhs a year under Section 24.
  • First time home buyers get a tax deduction on home loan interest under Section 80EEA up to Rs 1.5 Lakhs a year. If you sell the house within 5 years of possession, the entire deducted amount claimed in the previous year’s under Section 80C gets reversed and are taxed as income for the next financial year.

Tax Benefits on Joint Home Loans

You and spouse can avail a joint home loan and enjoy tax benefits under Section 80C and Section 24 individually. This means both you and spouse can avail Section 80C and Section 24 benefits separately, doubling the tax benefit. Tax benefits on joint home loans are available to all co-owners. You must be a co-owner to get the joint home loan tax benefits. You must also be a co-applicant as per loan documents.

See Also: How to Select the Best Home Loan?

Tax Benefits on Under Construction Property:

  • The total interest you have paid during the pre-construction period is divided into 5 equal installments and claimed in the year in which the construction is completed. (Property has been handed over to you).
  • The maximum deduction is capped at Rs 2 Lakhs a year for self-occupied house.
  • There is no tax deduction benefit under Section 80C on home loan principal during the pre-construction period.
  • The home construction must be completed within 5 years from the financial year in which you have availed the home loan. If not completed then only Rs 30,000 is tax exempt.

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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