The Budget seeks to encourage people to buy houses. New loans up to Rs 25 lakh for first homes will be eligible for an additional tax deduction of Rs 1 lakh for interest payments.
"A person taking a loan for his first home from a bank or a housing finance corporation up to Rs 25 lakh between 1 April 2013 and 31 March 2014 will be entitled to an additional deduction of interest of up to Rs 1 lakh. This will promote home ownership and give fillip to a number of industries like steel, cement, brick, wood and glass, besides giving jobs to thousands of construction workers," Finance Minister P Chidambaram said in his Budget speech.
|Depending on your tax slab, you will save an additional Rs 10,000 (10% slab), Rs 20,000 (20% slab) and Rs 30,000 (30% slab) due to the additional Rs 1 lakh deduction on interest paid for new home loans up to Rs 25 lakh. It does not include the tax cess.|
With this, the total deduction for interest payment for 2013-14 will be Rs 2.5 lakh. If the interest component is less than the deduction limit, the balance can be claimed in the next financial year.
"This deduction will be over and above the deduction of Rs 1.5 lakh allowed for self-occupied properties under Section 24 of the Income Tax Act," said Chidambaram.
Taxpayers can continue to claim deduction up to Rs 1 lakh for repayment of home loan principal within the overall limit of Section 80C of the Income Tax Act.
of up to Rs 1.5 lakh for interest payment (under Section 24B) is allowed if the house is ready and occupied by the taxpayer. Any pre-construction interest is allowed to be deducted in five equal instalments within the Rs 1.5 lakh limit after the house is ready. If the house has been let out, the taxpayer can claim the entire interest component as deduction from the rental income.
"The move will boost the morale of many prospective home buyers. It's a welcome move and will encourage development of affordable housing and provide better employment opportunities in the real estate sector," says Brijesh Parnami, CEO (distribution), Destimoney Enterprises.