Home mortgage rates of interest coming all the way down to the tune of round 7 per cent (SBI house mortgage rate of interest begins at 6.70 per cent each year) is nice information for house patrons as it could result in decrease month-to-month EMI. However, if a house purchaser is shopping for unit, which is priced beneath ₹45 lakh, then she or he would have the ability to declare an extra ₹1.5 lakh earnings tax exemption on house mortgage curiosity cost beneath Section 80EEA. This earnings tax profit can be given along with ₹2 lakh house mortgage curiosity cost beneath Section 24(b) of the earnings tax act 1961. However, the query is, will the brand new inexpensive house mortgage borrower will have the ability to declare earnings tax exemption to its most restrict of ₹3.5 lakh? According to tax and funding specialists, the reply is ‘no’ as ₹45 lakh higher restrict cap on house mortgage quantity does not permit a brand new house mortgage borrower to assert the utmost ₹3.5 lakh exemption restrict at present house mortgage rates of interest regime.
Home mortgage EMI calculation
Highlighting the mismatch between ₹45 lakh house mortgage higher restrict in inexpensive housing and present house mortgage rates of interest Amit Gupta Co-founder & MD at SAG Infotech stated, “To take advantage of the tax benefit to the fullest i.e. ₹3.5 lakhs, it is necessary for the home buyers to take 90 percent loan on a residential property that is valued at ₹45 lakh for a period of 20 years at the interest rate of 9 per cent. Then only the new home loan borrower will be able to use up completely the limit of ₹3.5 lakh deduction.”
The Managing Director of the SEBI registered earnings tax resolution supplier firm went on so as to add, “The prevailing rates of home loans mirror the other picture — the present interest rates for affordable housing are nearly 7 per cent or less i.e. about 200 basis points lower than 9 per cent that is the requirement of affordable housing. Consequently, the home buyer cannot use up completely the permissible limit of the income tax concession.”
What’s the answer
Highlighting upon the answer required Kartik Jhaveri, Director — Wealth Management at Transcend Consultants stated, “The idea behind giving an additional ₹1.5 lakh income tax benefit under Section 80EEA was to support the Indian housing sector by fueling demand for affordable house. The idea has worked to some extent too but the new home loan borrower needs to understand that lower home loan may result in faster repayment of the principal as lower home loan EMI would allow them to keep the tenure of the loan lower may be 15 years instead of traditional 20 years. They should also remember that the lower home loan regime is not going to last for long and hence for that much time, the Government of India should think of increasing the ₹45 lakh affordable home loan limit so that the loan borrowers get maximum benefit of this lower home loan interest rate scenario.”
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