How will the new budget affect home loans?

by Finway FSC Empowering People Financially

Narendra Modi’s government recently announced the first budget of their second term. The main headline of their budget is that they have extended an additional deduction in home loans.

Nirmala Sitharaman, Finance minister, said that an additional deduction up to 1.5 lakh in interest paid. This will be applied in all home loans borrowed up to 31st March 2020. However, this is only applicable to a home that is valued under 45 lakh.

What is this extended deduction?

We need to understand this is an extended deduction, people will get a deduction of 3.5 lakh on loan against property in Delhi or anywhere in India.

How will this deduction apply to home loans?

So, if anyone avails for a home loan for the purchase of a home or construction of a house, the capital repayment, and interest repayment will qualify for this deduction. This deduction comes under separate income tax sections.

While the principal repayment has an overall limit of 1.5 lakh a year and comes under section 80C of the Income-tax Act, 1961. The interest payment on a home loan has an overall limit of ₹2 lakh a year. This deduction qualifies under section 24(b) of the same Act.

This deduction will benefit common man up to 7 lakh over a loan period of 15 years.

However, this deduction is only applicable if:

•        The loan is sanctioned in the ongoing financial year ending on 31st March 2020.

•        The purchase cost of the home shouldn’t exceed ₹45 lakh.

We need to understand this isn’t a low-interest home loans scheme, this is a pure deduction in the repayment.

Who will be affected by this scheme?

This additional deduction will benefit middle-class man in tier-2 and 3 cities or smaller towns. So, if you live in metropolitan or tier-1 cities, the house price will exceed the limit, and you won’t enjoy the deduction.

However, there are no low interest home loans for anyone else. On the contrary interest rate has been hiked for the upper class. Experts believe this deduction will encourage more middle-class family to buy houses. This is part of the ‘house for all’ initiative which can be completed with this scheme. So, a good move for many people but the people expected more from the government.

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Created on Aug 29th 2019 02:53. Viewed 107 times.

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