Income Tax for Home Buyer the Union Budget 2019-20 has proposed an additional tax benefit of Rs 1.50 lakhs on the interest component of home loans. We look at the eligibility criteria for claiming this benefit and how it differs from Section 24(b)
an additional Income Tax benefit of Rs 1.50 lakhs on the interest component of home loans, taken from specified financial institutions, under a new Section 80 EEA. This is in addition to the existing benefit of Rs 2 lakhs, which is available under Section 24(b), to a person who is buying a residential house for his own occupancy.
Additional benefit of Rs 1.5 lakhs: What is the exact benefit that is being proposed?
The additional benefit, is being offered under a proposed new Section 80 EEA, as a deduction from gross total income. There are certain conditions to be fulfilled, for being eligible to claim the proposed additional benefit of interest upto Rs 1.50 lakhs. The first condition, is that the value of the house being bought should not exceed Rs 45 lakhs, as per the stamp duty ready reckoner published by the state government. So, your agreement value is not relevant for this purpose. If you buy a house for an amount which exceeds the threshold limit of Rs 45 lakhs, you will still be able to claim this benefit, as long as the value does not exceed Rs 45 lakhs as per the stamp duty reckoner, which is also referred to as the circle rates.
How is it different from the existing Income Tax benefit available under Section 24(b)?
Presently, you are allowed to claim interest benefit for any money borrowed for purchase, construction, repair or renovation of a house, under Section 24(b). This deduction can be claimed with respect to any property, whether residential or not, without there being any restriction on the value of the house. However, the tax benefit under the proposed section, can only be availed of with respect to a residential house and that too, for a value not exceeding Rs 45 lakhs.
Deduction under the new provision can only be claimed for acquiring a residential house, whereas the benefit under existing provisions are available even for repair or renovation of your existing house property. The new benefit of interest under Section 80 EEA is available, only if the money has been borrowed from banks, whereas the benefit under Section 24(b) can be claimed, for money borrowed from anyone including your friends and relatives. The benefit available under Section 24(b) is available as a deduction under the head ‘Income from House Property’, whereas the new benefit on interest is proposed to be made available, as a deduction against your total taxable income from all sources.
