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Buying a home this year? Claim extra tax deduction of Rs 1.5 lakh

"It is a good time to buy your dream house because interest rates are at multi-year lows. After considering these tax deductions, the interest cost may come down even further," says Sudhir Kaushik, CFO, Taxspanner.com

Buying a home this year? Claim extra tax deduction of Rs 1.5 lakh

Taxpayers hardly received any benefit from the Union Budget 2019 except an additional tax break of Rs 1.5 lakh on interest paid by homebuyers under Section 80EEA. This is over and above Rs 2 lakh deduction available on the interest paid by homebuyers on home loan under Section 24B.

Therefore, in total, a home buyer can claim a deduction of Rs 3.5 lakh during the year. However, there are certain conditions that need to be fulfilled before you claim this deduction.   

  1. Only first time homebuyers can avail this deduction. There should be no house property in the name of the homebuyer to claim this deduction. This deduction is currently available only on purchases made in financial year 2019-20.  "Tax deduction under Section 80EE of the Income Tax Act 1961, can be claimed by first-time homebuyers for the amount they pay as interest on home loan," says Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa, CBRE.
  2. The deduction is only available on buying a house in the affordable category. There is a cap on the carpet area of the houses on which deduction can be claimed. "The carpet area must not be more than 60 square meters (645 square ft) for the house property located in metropolitan cities such as Delhi & NCR, Mumbai, Chennai, Bengaluru, Hyderabad and Kolkata. Properties located in other cities or towns must have a carpet area of less than 90 square meters (968 square ft)," says Rishi Mehra, CEO of Noida-based financial services company Wishfin.com.
  3. The stamp duty value of the property shouldn't be more than Rs 45 lakh. There is no cap on the loan amount that will be qualified for this deduction under Sec 80EEA. For deduction under section 80EEA, there is no cap on the loan amount and one can take loan up to the cost of the house property up to Rs 45 lakh. However, the loan sanction period should fall between April 01, 2019 and March 31, 2020 to get eligible for this deduction," says Kuldip Kumar, Partner and Leader, Personal Tax, at PwC India.  
  4. In case of joint property both the spouses can claim a deduction of Rs 1.5 lakh each. "If the property is jointly owned and funded by each of the spouse, both of them can claim a deduction of Rs 1.5 lakh per year subject to the satisfaction of the above mentioned conditions. However, they should make sure that the loan sanctioned should also be in a joint name and the conveyance deed/ sale deed should have names of both spouses as owners of the property," says Kuldip.

Experts believe as the real estate market is going  through a lot of stress with sales happening at a slow pace and prices not being risen over the past few years, developers have been offering various schemes and discounts. Therefore, it is an opportune time to buy your dream house.

"It is a good time to buy your dream house because interest rates are at multi-year lows. After considering these tax deductions, the interest cost may come down even further," says Sudhir Kaushik, CFO, Taxspanner.com.

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