First time homebuyers are likely to benefit the most from finance minister Arun Jaitley’s budget as they have been given an additional deduction on interest for a home loan sanctioned in the financial year 2016-17, up to Rs 35 lakh, provided the house value doesn’t exceed Rs 50 lakh and the buyer does not own any other house on the loan sanction date.
This benefit ought to have been extended for everybody, not only the lower middle class. Also, there should not have been a cap on the cost of the house which in this case has been set at Rs 50 lakh, says a tax expert.
The government had earlier provided a total deduction of up to Rs 1 lakh, towards interest on housing loan, for loan up to Rs 25 lakh and house value up to Rs 40 lakh, to be availed over financial year 2013-14 and financial year 2014-15 . The Government has now reinstated a similar deduction with revised limits and conditions, says Parizad Sirwalla, Partner – Tax, KPMG India.
The Budget has also proposed an increase in the limit of deduction of rent paid under section 80GG from `24,000 per annum to Rs 60,000 per annum to provide relief to those who live in rented houses and do not receive a House Rent Allowance.
In light of the increased rental costs, the increased deduction limits will benefit genuine tenants who rent a house because they do not own one, says Parizad
Tax experts also point out that the proposal to extend the tax deduction limit on house rent allowance will only benefit those who do not get house rent allowance.