Finance Minister Nirmala Sitharaman has made proposals in the Union Budget 2021-22, to lessen the impact of the huge cost of owning a home for ordinary citizens by way of sops for affordable housing. However, owning a house continues to be out of bounds for most, as a majority of Indians, 57% to be precise, still earn less than Rs 2.5 lakh per annum, according to 2020 data from the income tax department.
Finance Minister Sitharman announced a number of incentives for affordable housing and rental housing as part of direct taxation proposals.
Market conditions bode well for those who aspire to own a home of their own owing to record-low interest rates and lower property prices. Some states such as Maharashtra and Karnataka have already reduced stamp duties.
The finance minister proposed to extend the eligibility period for claiming of an additional deduction for the interest of Rs 1.5 lakh paid for the loan taken for the purchase of an ‘affordable house’ to 31 March 2022.
This additional deduction of upto Rs 1.5 lakh for home loans taken to buy affordable houses was introduced in Budget 2019-20, the eligibility for same has been extended till 31 March 2022.
“The government’s move in the Budget to extend the benefit of additional Rs 1.5 lakh tax deduction on home loan interest, until 31 March 2022, will act as a further impetus to the residential property sector. This move will augur well, especially for the affordable housing segment, which will benefit from the decision to offer a tax holiday for affordable housing projects for one more year, to boost supply,” said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com.
The finance minister extended the tax break for affordable rental housing for another year to ensure affordable housing for migrant workers. For promoting the supply of affordable rental housing for the migrant workers, the Minister announced a new tax exemption for the notified affordable rental housing projects.
“The support announced by finance minister for rental housing too will help migrant workers to a great extent and will support them in remaining in metros and other big cities during times of financial hardships such as the one presented by the Covid-19 pandemic,” Agarwala said.
The government allows tax deductions on interest and principal repayments on home loans taken by individuals. The home loan is repaid in equated monthly instalments (EMIs) which further is consists of principal amount and interest charged. Under Section 80-C, the deduction of upto Rs 1.5 lakh (along with other investments) on the principal is allowed against gross total income.
A maximum deduction of up to Rs 2 lakh for interest paid during the year under Section 24.