As the union budget was unveiled on February 1, 2021, affordable housing, tax exemption on home loan interest rates, tax holiday for realty developers, and rental housing remained the key focus areas. The Central Government has taken these measures to encourage citizens to invest in affordable houses.
So, if you are planning to buy a house on loan, here is a guide to understanding various home loan tax benefits 2021 has in store for you.
Additional tax benefit in 2021
In her budget speech, Finance Minister Nirmala Sitharaman proposed extending tax deduction on home finance under the affordable housing scheme for another year till March 31st, 2022. Focusing on ‘Housing for All’, the tax holiday on affordable housing projects and an additional income tax rebate on home loan 2021 is in place now. The rebate, effective from April 1, 2021, allows a tax deduction of Rs 1.5 lakhs on home finance for first-time homebuyers.
This exemption is offered on top of the Rs 2 lakh deduction available on housing loan interest payment subject to specific terms. Thus, the total housing loan tax exemption 2021 for an individual taxpayer on the interest payment for purchasing an affordable house is Rs 3.5 lakhs annually.
Experts say that these measures can increase the demand for affordable properties amid the lower income groups.
Home finance taxation- a brief history
The taxpayer who has availed a home loan will now receive an additional deduction on the interest component. Under Section 24(1), home loan borrowers are permitted to claim a deduction worth Rs 2 lakhs. Last year, the government introduced the Section 80 (EEA) for providing extra tax deduction of Rs 1.5 lakh to first-time homeowners and the benefits were valid up to March 31, 2021.
Additional Read: Home Loan Tax Benefits Explaining Section 80EEA, 24 and 80C
Who is eligible for the tax benefits?
For availing the tax exemption, prospective homeowners must fulfil the following conditions:
- The residential property’s total stamp duty value should not go beyond Rs 45 lakhs.
- The taxpayer must not already own a house property (residential) on the loan sanction date.
- Borrowers can claim exemptions on home financeinterest payment only.
- If a housing loan is availed jointly by the property’s co-owners, each borrower can request deduction up to Rs 2 lakhs each along with the principal repayment of up to Rs 1.5 lakhs.
- The benefits apply to first-time homebuyers opting for a home under the government’s Affordable Housing Scheme.
Additional Read: Everything You Need to Know About Tax Benefit on Home Loans
In 2020, life took a dramatic turn, and financial constraints put off house purchases for many people. However, with tax deduction support from the government and easy housing finance options by Tata Capital, give your home buying journey a head-start.
Trust us for relaxed home loan eligibility criteria, attractive interest rates, and flexible tenures. For more information, get in touch today!