While making no change in personal Income Tax slabs in the Union Budget 2016-17, Finance Minister Arun Jaitley announced the much awaited additional deduction for interests on home loans, as the costs of housing units have increased much over the recent years. By introducing an additional deduction of Rs 50,000 in the Budget 2016 proposal, Finance Minister Arun Jaitley has given some reason to cheer to the first time home buyers.
This additional deduction has been given on interest for loan up to Rs 35 lakh sanctioned in 2016-17 for first time home buyers, provided the house value doesn’t exceed Rs 50 lakh.
A home buyer in India is entitled to claim both the interest and principal components of home loan repayments for tax benefits. Currently interest payable on a ‘self-occupied’ house is subject to a maximum deduction of Rs 2 lakh under the head ‘Income from House Property’.
Besides interest, the portion of one’s EMI which goes towards principal repayment is allowed to be claimed under Section 80C. This amount can be claimed within the overall limit of Rs 1,50,000 under Section 80C.
This additional deduction for interests on Home loan will also encourage investment in the realty sector.
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