First-time homebuyers have something to cheer about as Budget 2016 proposes deduction of an additional interest of Rs 50,000 per annum on loans of Rs 35 lakh and below.Tax experts, however, say this benefit should have been extended to the entire middle class.
At present, Section 80EE of the Income Tax Act provides for deduction of Rs 1 lakh for a home loan. This benefit was available for two assessment years from April 1, 2014, and April 1, 2015. It is now proposed to amend this provision to provide an additional deduction of Rs 50,000, subject to the condition that the loan has been sanctioned by the financial institution during the period beginning April 1, 2016, to March 31, 2017.
To avail of this benefit the home loan sanctioned should not exceed Rs 35 lakh and the value of the residential property should not exceed Rs 50 lakh. Also, the assessee should not own any residential house property on the date of the sanction of the loan.
Tax experts say that this should not have been limited to home loans worth Rs 35 lakh alone but should have been proportionally increased for all. “That would have benefited the entire middle class, especially those who have bought houses in cities where buyers may have taken loans starting at Rs 40 lakh and going up to a crore,” says a financial expert.