To provide a boost to the affordable housing segment, central govt. has raised tax deduction limit to Rs. 3.5 lakh on interest paid on housing loan. Now all the home loans sanctioned during this financial year for purchase of first home worth up to Rs. 45 lakh would comply with this interest deduction limit.
The Union govt. is also going to start reform measures to promote rental accommodations. For this purpose, govt. will formalise and finalize a tenancy law to the respective states.
In her 1st Union Budget 2019-20, Smt. Nirmala Sitharaman has also announced that govt. will provide 1.95 crore homes to eligible beneficiaries till 2021-22 under Pradhan Mantri Awas Yojana – Gramin (PMAY-G).
FM Nirmala Sitharaman said the interest paid on housing loans is currently allowed as a deduction to the extent of Rs. 2 lakh. The central govt. will now provide an additional deduction of upto Rs. 1.5 lakh for interest paid on home loans borrowed upto 31 March 2020. All the housing loans taken for purchase of affordable houses valued upto Rs. 45 lakh would be eligible for this tax deduction.
To align affordable housing under Income Tax (IT) Act with GST Act, govt. has raised carpet area of houses. Now the limit of carpet area is increased from 30 sq.m to 60 sq.m in metropolitan regions. Accordingly in non-metropolitan regions, carpet area is raised from 60 sq.m to 90 sq.m. However, the cost of affordable house is fixed at Rs. 45 lakh and below.
Now anyone purchasing an affordable house will be eligible for interest deduction of Rs. 3.5 lakh. This move is going to provide a benefit of around Rs. 7 lakh to middle class home buyers for a loan period of 15 years. In Union Budget 2019-20, it is clearly mentioned that interest deduction is only applicable when loan has been sanctioned in current fiscal year only.
All the home buyers must not have any other residential property in their name on the date of sanction of loan i.e they must be 1st-time homebuyers. To realize the vision of “Housing for All” and “Affordable Housing”, govt. is already providing a tax holiday on the profits earned by developers of affordable housing.