Remember to availed new home loan tax benefits of Budget 2016?
While doing your tax planning for this financial year, i.e., 2016-17, don’t forget to claim some of the new tax benefits introduced in the last budget. Home loan borrowers should remember to claim these additional benefits if they qualify.Further, those who do not get HRA should also check as to whether they can claim the increased tax break given to them in Budget 2016.
1. Extra deduction on home loan
The first home buyers availing home loans in 2016-17 are allowed to take additional tax benefit of up to Rs 50,000 under section 80EE of the Income Tax Act, 1961.Currently a home loan borrower paying interest on the loan can claim deduction of interest so paid from his/her gross total income up to a maximum of Rs 2 lakh per annum under Section 24 of the Income Tax Act. However, this deduction can be claimed only if the property for which the loan is taken is self occupied. The deduction of Rs 50,000 introduced in Budget 2016 is over and above this limit of Rs 2 lakh. But, there are some conditions attached to it, as listed below:
The additional deduction with respect to interest on loan taken will be applicable only for residential self occupied house property.
It’s only for first time home buyers.
The maximum additional benefit is capped at Rs 50,000 a year.
The value of the house for which loan is taken cannot exceed Rs 50 lakh.
The loan amount cannot exceed Rs 35 lakh.
The loan has to be sanctioned between April 1, 2016 and March 31, 2017.
Illustratively, on a home loan of Rs 35 lakh at 9.6/8.6 per cent interest for 15
years, the first year interest amount comes to approximately Rs 3.3 lakh and Rs
2.96 lakh, respectively.
2. Increase in time period for claiming deduction of interest
In a home loan, the interest payable up to Rs 2 lakh gets deducted from gross total income while computing income from selfoccupied house property. This,however, applies only in cases where the acquisition or construction of the
house is completed within three years from the end of the financial year inwhich the loan was taken.
In Budget 2016, there was a relaxation in the time period and the tax benefit would hold even if the acquisition or construction is completed within five yearsfrom the end of the financial year in which the capital was borrowed.
For all those getting house possession this year (2017), this extension gives arelief. With builders not completing projects on time and delivery of homesgetting delayed, this change in tax rules will benefit several home loan
borrowers and they will not suffer (due to inability to avail tax benefit) because of builder’s default in handling over the homes in time.
3. Benefit for those not getting HRA : Rationalisation of the limit ofdeduction allowed with respect to rents paid
Section 80GG provides for a deduction of any expenditure incurred by an individual in excess of 10 per cent of his total income towards rent payment with respect to any furnished or unfurnished accommodation occupied by him as his residence if he is not granted house rent allowance (HRA) by his employer, to the extent that such excess expenditure does not exceed Rs 2,000 per month or 25 per cent of his total income for the year, whichever is less.
In Budget 2016, relief was provided to such employees. The maximum limit of deduction was increased from the existing Rs 2,000 per month to Rs 5,000 per month.