For any average Indian, buying a individual house is one of the major priorities in his/her life. Whether it is through a loan or from paying through the hard-earned savings , the average individual has to shell out a considerable amount of money for a roof over his/her head.
A home loan is an ideal option for a buying a new home and especially if you have several years of employment ahead of you. In fact, it works better than using your savings, as the tax laws provides benefits both for the payment of interest and repayment of the principal amount. Typically, the longer the loan tenure, the lower is the monthly EMI, but higher is the interest outgo. For instance, one bank charges an EMI of Rs. 37,522 for a loan amount of Rs 20. lakh for a duration of 5 years. For loan tenure of 10 years, the EMI charged is Rs. 26,875. But these are basics which most of us already know. With the recent Union Budget-2016 doling out several benefits for homebuyers we need to see what the benefits actually are for first –time and second home buyers.
To start on a positive note it is a welcome budget. Exemption of tax on construction of houses up to 60 sq. m. and additional exemption of Rs. 50,000 for houses costing up to Rs. 50 lakh will help realty sector and first-time home buyers. Even exemption of service tax on low cost housing is a welcome, but there is no mention of ease of doing business.
Though exemption of tax for units up to 60 sq. m. will help builders come up with more affordable housing. It would have been better if the exemption was given to housing units up to 90 sq m.Also raising of House Rental Allowance (HRA) deduction to Rs 60,000 from Rs 24,000 will help those living in rental homes. But government should have focused more on announcements that drive people to buy homes, leading to an increase in activity in the sector.
So for the first-time home buyers, with effect from April 1, 2016, an additional deduction of Rs. 50,000 per annum on account of interest paid on housing loan is available under Section 80EE. The deduction would be available if loan is sanctioned by a bank during April 1, 2016-31 March, 2017, the value of loan sanctioned is up to Rs. 35 lakh and the value of this house does not exceed Rs. 50 lakh.
It may be cheaper to book an 2bhk apartment under construction. In this case, you can claim the total interest paid during the pre-delivery period as a deduction in five equal installments starting from the financial year in which the construction was completed or you acquired your apartment flats (generally this denotes the date of possession). Of course, the maximum you can claim as deduction per year continues to be Rs. 2 lakh if the loan is taken before April 1, 2016 or Rs, 2.5 lakh if the loan is taken on or after April 1, 2016 by a first-time home buyer.
Considering if you have chosen to purchase a new apartment/house in a Tier 2 town where property is cheaper, and continue to stay in a rented premise, this new apartment/house will be regarded as ‘self-occupied’ entitling you to deduction of housing loan interest
We, at Bridge County enjoy the advantage of being the largest Integrated Township in the State of A.P. and have become one among the prominent landmarks of Rajahmundry. Our venture is a pre-Approved Project & has been approved for bank loans. Apart from these basic points there are several other benefits of purchasing a home jointly with your spouse and other related tax benefits one can avail while buying a home. A detailed session with a financial planner/banker would help you get a better perspective of tax exemptions while purchasing a house and choose the right option while purchasing a house.