A first time homebuyer can avail Rs 1,50,000 under Sec 80 EEA for interest payment by getting a home loan sanctioned by March 31
Owning a home gives you considerable financial as well as emotional freedom. It ensures a social security of the owner. Though there is no specific ideal time whatsoever to close the deal, the current circumstances are conducive for buying a home. Since the rate of interest is at historic low, you end up saving a sizable amount at the end of the day if you go for booking a home now.
Beginning April 1, purchasers would no longer be eligible for the additional tax advantage of Rs 1.5 lakh under Section 80 EEA of the Income Tax Act, 1960, which is presently available for affordable housing.
So, if you’re looking to buy a home that meets the Sec 80 EEA eligibility conditions, it’s a good idea to have your home loan approved before the deadline on March 31, and then wait for the disbursement.
Rajat Mohan, senior partner, AMRG & Associates, elaborates, “With the objective of Housing for all by 2022, a new Section 80EEA has been inserted to allow an additional deduction for interest payments up to Rs 1,50,000 (over and above the deduction of `2 lakh for interest payments under head house property [Section 24(b)]) from AY 2020-21 (FY 2019-20).”
For availing the benefit of this section, the housing loan should be sanctioned during the period April 1, 2019 and March 31 2022. Stamp duty value of the house property should be `45 lakhs or less.
First time homebuyer
“The taxpayer should be a first-time home buyer and should not own any residential house property. So, if a person is satisfying all the above-mentioned condition, then he shall be eligible to claim the deduction u/s 80EEA of the Act,” Mohan adds. For a lot of people, the work from home concept could become a permanent thing. They have realised the need to create workspace, home space, and family space all under one roof. As a result, there has been a surge in demand for larger homes.
Pramod Kathuria, founder and CEO, Easiloan, further elaborates, “There are multiple sections of the Income Tax Act that allow a homebuyer to save taxes on interest and/or principal amount. In some ways, this is a gesture by the government to enable home buying and ease the burden on the borrower. The popular ones are obviously tax relief on the principal amount under 80C (up to `150,000 and tax deduction under Section 24(b) on interest paid (up to `2 lakh for a self-occupied and entire amount under rebate for let-out properties). And then there are 80 EE and 80EEA sections which have been in force in the last few years.”
Section 80EE enables an additional deduction of Rs 50,000 over and above Section 24(b) for home loans sanctioned during FY 2016-17.
“Section 80EEA directly enables affordable housing and this applies to first-time homebuyers and a transaction value under `45 lakh. Also, it cannot be clubbed with 80E. As you can see, it is a huge benefit and clearly defined to support the first-time affordable home buyer. Hence, a beautiful move which began in Budget 2019 and since then was extended every year. Importantly this covers under-construction property as well unlike Section 24(b) which was for those where possession has been received,” Kathuria further adds.
Meanwhile, the Central Government has decided not to extend this sop beyond March 31.
Kathuria advises that if potential homebuyers are planning to buy a home anytime in 2022-23, then they should go for a home loan sanction by the end of this FY itself (that is before March 31, 2022). This sanction will allow them to leverage benefits under Section 80EE A and for the entire tenure of your home loan.
Of course, the usual conditions under 80 EE A as mentioned earlier shall apply. “Also, in my opinion, a home loan sanction before locking on the house is always a good move – it indicates that you are a serious buyer and gives you negotiation leverage,” Kathuria maintains.
Driving home the point that it is an ideal time to seal the deal, Adhil Shetty, CEO, Bankbazaar, says, “Buying a house is one of the most cost-intensive exercises of our lifetime. Therefore, the best time to purchase your dream home is when you are financially ready for it. If you have lost money on the stock markets, your readiness may be impacted, and therefore you may want to delay your decision.”