Want to avail tax benefits on affordable housing? You have little time left to get home loan sanctioned

On fulfilling the conditions u/s 80EEA, a homebuyer may get a deduction up to Rs 3.5 lakh (Rs 2 lakh u/s 24 and Rs 1.5 lakh u/s 80EEA) on interest paid on home loan.

Apart from getting deduction up to Rs 2 lakh from the taxable income under Section 24 of the Income Tax Act, purchasers of affordable housing are eligible for the additional tax deduction of Rs 1.5 lakh under Section 80 EEA – provided that the value of the house property should not exceed Rs 45 lakh and the carpet area of the house property should not exceed 60 square meter (645 sq ft) in metropolitan cities of Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region), while in any other cities or towns, the carpet area should not exceed 90 square meter (968 sq ft).

So, on fulfilling the conditions u/s 80EEA, a homebuyer may get a deduction up to Rs 3.5 lakh (Rs 2 lakh u/s 24 and Rs 1.5 lakh u/s 80EEA) on interest paid on home loan. However, unless extended further, the benefit may only be availed on the home loans sanctioned on or before March 31, 2022.

“So from the beginning of April 1, 2022 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,” said Pramod Kathuria – Founder and CEO, Easiloan.

“There are multiple sections of the Income Tax Act that allow a home buyer 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,” he added.

According to Kathuria, some of the tax-saving provisions are –

  • Tax relief on the principal amount under 80C (up to Rs 150,000 and tax deduction under Section 24(b) on interest paid (up to Rs 2 lakh for a self-occupied and entire amount under rebate for let-out properties).
  • Deductions are also available under Sections 80 EE and 80EEA, which have been in force in the last few years.
  • 80EE enables an additional deduction of Rs 50,000 over and above Section 24(b) for home loans sanctioned during FY 2016-17.

“80EEA and one of my favorites since it directly enables affordable housing – An additional deduction of Rs 150,000 over and above Section 24(b). This applies to first-time home buyers and a transaction value under Rs 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,” said Kathuria.

“Now, the Central Government will not renew this sop beyond 31 Mar 2022. Hence, my advice to potential homebuyers (under affordable housing) is that if you are sure of buying a home anytime in the next FY (FY 2022-23), then go for a home loan sanction by the end of this FY (before 31 Mar 2022). This sanction will allow you to leverage benefits under Section 80EE A and for the entire tenure of your home loan. Also, you can go for disbursal anytime up to 31 Mar 2023,” he added.

“This is a good hack to ensure you don’t miss this benefit. 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 further said, adding, “Also, if you have already locked in on that dream home, you have to go for closing the home loan sanction before March 31, 2022.”

“Just in case, you are some time away from the entire home buying and home loan application, you need not fret over missing this opportunity. There are 80EE and other sections as mentioned earlier. Also, affordable housing is a priority area for our government, so always be optimistic about a new benefit kicking in the future,” Kathuria suggested.

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