You have waited for a long time to buy your own home. Perhaps too long…. Your biggest worry...Will you ever step into your own home? All your friends have bought their own homes. When will your time come?
This just might be the year, you get to step into your dream home. Banks have reduced home loan interest rates and your feet take you to the bank. You feel your home loan will be sanctioned. Then the Union Budget 2016….
Things just got simple. Avail a home loan and buy your own home.
The Union Budget 2016, has brought much cheer to first time home buyers in the country. You get an INR 1.5 Lakh tax deduction, under Section 80 C of the income tax act, on the principal component of your home loan. You get a tax deduction of INR 2 Lakhs under Section 24(b), on the interest you pay on your home loan. If you are a first time home buyer, you get an additional tax deduction of INR 50,000 under Section 80 EE of the income tax act, on the interest you pay for your home loan.
There are certain conditions you need to follow, to get the INR 50,000 deduction under Section 80 EE of the income tax act, on the interest you pay for the home loan.
You need to be a first time buyer of a house. (This should be the first time you buy a home).
The value of the home loan taken should not be more than INR 35 Lakhs.
The home loan should be sanctioned between 1st April 2016 and 31st March 2017.
The value of the property purchased should be less than INR 50 Lakhs.
This deduction is available from the Financial year 2016 to Financial year 2017. (1st April 2016 to 31st March 2017. (A period of 1 year)
You get this deduction till the time you repay the home loan.
You avail a home loan of INR 26 Lakhs, from a reputed bank, for tenure of 15 years. You have to pay an interest of 9.5% per year, on the home loan. You have to pay an EMI of INR 27,150 on your home loan. Your home loan EMI (interest portion) for the first year, is INR 2.44 Lakhs.
You can avail a total deduction of INR 2.5 Lakhs on the interest portion you pay for the home loan (Home Loan EMI’s). You get this deduction on combining Section 24 and Section 80 EE. Your home loan EMI (interest portion) for the first year, is INR 2.44 Lakhs. This is easily covered under the combined INR 2.5 Lakhs tax deduction, on the interest portion of your home loan.
Conclusion: Before the Union Budget 2016, you got a tax deduction of only INR 2 Lakhs under Section 24(b), on the interest you pay on your home loan. You would have to pay a tax on the remaining INR 44,000 interest on the home loan.
After Union Budget 2016, you get an additional tax deduction of INR 50,000 under Section 80 EE. Your home loan EMI (interest portion) for the first year of INR 2.44 Lakhs, is covered under the combined INR 2.5 Lakhs tax deduction of Section 24(b) and Section 80 EE.
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