Homebuyers avail additional Rs. 1.5 lakh deduction on home loan interest for properties worth up to Rs. 45 lakh :

Housebuyers will be able to avail an additional Rs. 1.5 lakh deduction on home loan interest for properties worth up to Rs. 45 lakh.

This is over and above the existing deduction of up to Rs. 2 lakh.

Effectively, home buyers of affordable housing can claim deduction of up to Rs. 3.5 lakh. 

This Rs. 1.5 lakh extra deduction can only be claimed on loans sanctioned during the current financial year 2019-20.

 Also, the individual must not own any residential property on the date of sanction of the loan.

 According to the Finance Minister Ms. Nirmala Sitaraman, this deduction will translate into a benefit of about  Rs. 7 lakh for homebuyers over a loan tenure of 15 years.

A 15 year home loan of up to Rs. 35 lakh at an interest of 8.7% translates into an interest outgo of Rs. 2.99 lakh in the first year. 

At 9% interest on a 15 year home loan, the interest payment in the first year works out to Rs. 3.12 lakh.

Effectively, most new homebuyers who have taken a loan this year will not be able to claim the entire deduction of Rs. 3.5 lakh.

Further, this interest outgo will progressively reduce over the years. By the ninth year, the interest component would drop below Rs. 2 lakh.

Borrowers will not materially benefit from the additional deduction in later years.

Even then, the total deduction of up to Rs. 3.5 lakh will translate into tax savings of about Rs. 70,000 in the first year for someone in the 20% tax bracket.

The total savings over a 15-year tenure would add up to more than Rs.  5.5 lakh.—Team ET

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