Know What Homebuyers get from extension in Affordable Housing Deduction

Know What Homebuyers get from extension in Affordable Housing Deduction

Union Finance Minister, Nirmala Sitharaman did her best to restore the confidence of the Indian real estate as the market witnessed a massive setback due to the liquidity issue last year. While emphasizing on the PMAY Scheme, Sitharaman announced an extension on affordable housing interest deduction by one year. This decision has certainly come as a relief to the homebuyers under Section 80EEA.

Current Benefits offered under Tax Deduction for Affordable Housing Projects:

Presently, the buyers who have availed home loan until 30th March 2020 are eligible to take up the additional deduction on home loan interest that values at Rs. 1.5 lakhs. This affordable housing deduction under income tax is offered on a dwelling unit with a carpet area of 90 sq. meter in tier-II cities and 60 sq. meter in metro cities. However, the residential unit should not more be more than or equal to Rs. 45 lakhs.

Under the PMAY Scheme, the Union Government formulated a Credit Linked Subsidy scheme [CLSS] to offer subsidy on different types of house properties to the home buyers falling under the Low-Income Group, Economically Weaker Section and the Middle-Income Group.

The prospects belonging to the EWS section with a yearly income of Rs. 3 Lacs can apply for a residential unit under this scheme. Similarly, the homebuyers having an annual income between Rs. 3 lakh and Rs. 6 Lakhs can apply under the Low-Income group. Those earning between Rs. 6 Lakhs to Rs. 12 Lakhs annually can also apply for a residential unit under the Middle-Income group.

Under the current provision, the homebuyers under LIG, EWS, MIG 1 and MIG 2 can avail a subsidy of Rs. 2.67 lakh, Rs. 2.35 lakh and Rs. 2.30 lakh respectively.

What Homebuyers will get from new Tax Deduction for Affordable Housing Projects:

The Union Finance Minister gave a one-year extension on the interest on housing loan deduction for FY 2020-21. This announcement is made to attract maximum buyers towards the affordable housing segment so that the target of Housing for All can be achieved by March 2022 that is also the set deadline for the completion of the PMAY scheme.

  • The Narendra Modi-led Central Government is approaching the target of offering affordable homes to 1 crore people as they promised at the launching of the PMAY Scheme in 2015. Thus, the one-year push in deduction of interest on borrowing home loan on affordable housing unit is introduced so that more people get freedom from the rent cycle where a lot of money has to be invested such as in security deposit and more. This decision empowers the prospects to buy a housing property while availing a rebate under Section 80EEA of income tax act.
  • The new tax slabs will offer a whole new way to avail rebates such as tax deduction on affordable housing projects. The decrease in tax paying percentage will hence the buying power of the prospects. Thus, this will be a boost to the dream of owning a home anywhere in the country.
  • The current liquidity issue has left several homebuyers in lurch but the tax holiday introduced for the developers in the Union Budget 2020 will ensure timely competition of residential projects. This announcement will reinstate the trust of homebuyers in the realtors and thousands of buyers get their dream home while availing the interest on housing loan deduction for FY 2020-21.
  • The one-year extension will also offer homebuyers more property options to choose from as the developers will planned more housing projects under the affordable housing segment.

Apart from these, the homebuyers can get various advantages under the affordable housing deduction under income tax.

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