If your builder doesn't give you possession of that dream house within the promised three years, sweat not. For, the 2016-17 Budget proposes tax relief on interest payment on home loan if the property bought, or under construction, is completed within 5 years from the end of the financial year in which the loan was availed instead of the current 3 years.
The relief, under Section 24 of I-T Act, could help save tax up to Rs 60,000 per annum. In a further boost to the affordable segment, FM Arun Jaitley also proposed to allow deduction for additional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned during the next financial year for first-time home-buyers, provided the value of the house doesn't exceed Rs 50 lakh.
Assuming a loan of Rs 35 lakh to be paid over 20 years, the annual deduction comes to around Rs 2.5 lakh, including the Rs 2 lakh currently available. At 9%, the interest outgo in the first year would be Rs 3.12 lakh. So, the buyer will save Rs 75,000 if he is in the 30% tax-bracket, bringing down the effective interest rate in the first year to 6.8%.
For the first seven years, the interest outgo will remain above Rs 2.5 lakh and, so, the buyer will continue to get an annual tax benefit of Rs 75,000. For employees who don't get HRA benefits, the FM raised the deduction against house rent from Rs 2,000 per month to Rs 5,000. This would result in tax savings in the range of Rs 3,708 to Rs 12,204, depending on the income slab.
Scource: Times of india