If you purchase a house of value up to ₹45 lakh on loan by 31 March 2020, you will get an additional deduction of ₹1.5 lakh for interest paid on loans. Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to ₹3.5 lakh, according to the finance minister’s speech.
The move is to improve real estate demand.
“The economy is slowing down and consumption is at a 20-quarter low coupled with a liquidity crisis,” said Chawla. Apart from this new proposed deduction, the interest paid on housing loans was already allowed as a deduction to the extent of ₹2 lakh but for ‘self-occupied property’. Will the interest component go up to ₹3.5 lakh?
“Let’s say you bought a house for ₹45 lakh and took a loan of ₹20 lakh at 9% interest rate. The EMI will be around ₹20,285 for a 15-year period in which around ₹15,000 per month—annual interest outgo of ₹1.8 lakh. However, if you take a ₹40 lakh loan, your EMI will be around ₹40,571, ₹30,000 and interest component adds up to ₹3.6 lakh in a year. In this case, the annual deduction of ₹3.5 lakh will come in handy. ” said Sadagopan.