There are many advantages for a first-time home buyer, especially if you are planning to buy a house on a home loan which comes with multiple tax benefits that significantly reduce your tax expenditure.
Here are some tax benefits of buying a house for first-time home buyers:
Extra Deduction on Home Loan Paid
If you are buying a home by taking a home loan, you can take a tax exemption of Rs. 50,000 under Section 80 EE of the Income Tax Act, 1961. A home loan borrower paying interest on the home loan can claim a deduction on interest from the total gross income. The maximum deduction allowed is Rs 2 lakh per annum under Section 24 of the Income Tax Act, 1961.
Here are some conditions under which you can avail this benefit
- An additional deduction can only be availed for interest on a loan for a self-occupied residential property and not rented.
- The maximum additional benefit is capped at Rs. 50,000 a year
- If you want to enjoy the first-time home buyer benefits, the value of the house shouldn’t exceed Rs. 50 lakh, and the loan amount shouldn’t exceed Rs. 35 lakh.
- The home should have been sanctioned between a financial year, i.e., 1st April- 31st March.
Increase in period for claiming deduction of interest paid
Interest paid up to Rs. 2 Lakh is deductible from the gross total income while calculating income from self-occupied house property. However, this is only applicable if the construction or acquisition of the house gets completed within five years from the end of the financial year in which the home loan was taken.
Tax Benefits in the absence of House Rent Allowance (HRA)
Are you someone who is not getting any HRA from your employer? Then worry not. Here comes Section 80GG of the Income Tax Act, 1961, which helps you avail of some tax benefits. This gives a deduction for any expenditure incurred by an individual, in excess of 10% of their total income for rent payment, for a furnished/unfurnished accommodation if they are not granted HRA by their employer or are self-employed.
But hold on, conditions ahead. The excess expenditure must not exceed Rs.2,000 per month or 25% of their total income for the year, whichever is less.
Pradhan Mantri Awas Yojana (PMAY) for Home Buyers
The PMAY scheme is for home buyers from economically weaker sections, lower-income groups, and middle-income groups. If you are from any of these sections, this scheme from the Government of India helps you claim tax subsidies on home loans.
And how do you define income groups? The beneficiaries under the PMAY scheme can be listed as follows:
- Economically Weaker Section – With an annual income of up to Rs. 3 Lakh
- Lower Income Group– With an annual income of not more than 6 Lakh
- Middle Income Group – With an annual income of not more than 12 Lakh
Depending upon the income, the subsidy rates on the principal amount vary. Here are the parameters to decide how much subsidy you can get:
Loans to be granted
- Economically Weaker Section – Not more than 6 lakhs
- Lower Income Group– Not more than 9 lakhs
- Middle Income Group – Not more than 12 lakhs
- Economically Weaker Section – 6.5 % on interest
- Lower Income Group– 4 % on interest
- Middle Income Group – 3 % on interest
First-time homebuyers can enjoy these above-mentioned special advantages that are created to encourage new entrants into the real estate market.
Want to buy a house?
Mumbai is one of the best cities in India to buy a house. With excellent social infrastructure and better connectivity, this ‘city of dreams’ has everything to improve the living standard of the people.
With many new projects in Mumbai, finding your dream is not a difficult task. Ashwin Sheth Group is constructing the finest residential property in Kanjurmarg, Sheth Avante. It offers amenities-rich homes designed to fulfill people’s aspirations where they can craft some priceless memories. Sheth Avante is one of the affordable projects of Ashwin Sheth Group, where home buyers can opt for a loan.
Those looking for 2 BHK flats in Kanjurmarg can consider investing in Sheth Avante. Strategically situated in a convenient location, this residential property is in close proximity to reputed educational institutes, hospitals, shopping malls, and business centres. All these facilities ensure ease and convenience for its residents and promise a stress-free life.