Budget 2021: Additional Deduction on Home Loan Interest Extended Till March 2022

In the 2021 Union Budget, the Finance Minister announced that the additional tax deduction option on home loan interest payment would be extended for a year till March 2022. This move to extend the timeline to avail tax deduction of up to Rs.1.5 lakh is aimed at small taxpayers so they can purchase affordable housing. This also solves the problem of low demand in the real estate sector.

The FM had introduced this new tax exemption in 2019 by introducing a new Section 80EEA. This was in addition to the Rs.2 lakh deduction for first-time homebuyers under certain conditions. Thus, homebuyers can avail Rs.3.5 lakh worth of total tax deduction for home loan interest payment till 31st March 2022.

Objectives behind introducing the tax exemption

This budget proposal is made with the ‘Housing for All’ objective enabling small taxpayers to purchase affordable housing with a home loan.

The government has also announced tax exemption for notified Affordable Rental Housing Projects to enable migrant workers to afford accommodations. This move aims to increase the supply and demand in the affordable housing segment, which had taken quite a hit during the 2020 financial year.

According to data-analytic firms and property consultants, housing sales fell around 40% -50% due to the Covid-19 pandemic. However, the situation has improved because of increasing pent-up and festive demands and low home loan interest rates.

Conditions to avail the tax deductions

Individuals need to fulfil certain conditions in order to avail the tax benefits -

• One can apply home loan from only a recognised financial institution and only to buy a residential property.
• The loan must be availed after 1st April 2019 and before 31st March 2020 to enjoy the tax deduction on home loan interest.
• The home loan must be for affordable housing with a stamp duty value of less than or equal to Rs.45 lakh. Affordable houses have a carpet area not exceeding 60 square meters in metropolitans and 90 square meters in other cities and towns.
• An individual who wants to claim a deduction can own no other house property on the date he/she gets a sanction for their loan.

What does this tax benefit mean for homeowners and buyers?

An individual taxpayer can reduce his/her liability with this deduction. The deduction is available on the amount of home loan interest paid towards settling EMIs.

With such low-interest rates and low-cost to mid-range prices on real estates, it’s a great time to look for new homes. Potential buyers can even lower their interest rates further by looking into the various factors that impact home loan interest rates.

The low interests also make it an excellent time for homeowners to get a better deal with lower EMIs. If you find yourself financially burdened with high EMIs, you can apply for a home loan balance transfer. You should check the interest rates offered by various financial institutions before applying for a loan using a home loan interest rate calculator.

To make the home loan process more accessible, well-known NBFCs provide pre-approved offers. These offers are available on different types of loans such as home loans, property loans etc. With them, customers can do away with worrying about the loan’s processing and can focus on making sure they are saving the most by using a home loan calculator. If you are looking forward to availing a loan, check your pre-approved offer by providing your name and contact number.

With such deductions on interest rates and affordable prices on real-estates, one can expect a heightened growth in this sector, unlike that of 2020. The sudden increase in demands could very likely see many individuals competing to buy new homes at the most affordable prices.