Union Budget 2021: In Budget 2021, relief was announced for those taking home loans. The Finance Minister announced that it is proposed to extend the tax deduction by another year up to Rs 1.5 lakh on the interest payment of home loans for the purchase of cheap houses. That is, taxpayers can now take advantage of this additional deduction till 31 March 2022.
In Budget 2019, the government made a provision for an additional deduction of up to Rs 1.5 lakh on the interest payment of home loans by adding new section 80EEA in the Income Tax Act. It was then said that only those people who have taken loan between April 2019 and March 2020 can take advantage of this. In the budget 2020, this deadline was extended for one year. Now in Budget 2021, this relief has been extended once more for another year. By March 2022, home loan borrowers will be able to take this benefit.
With this relief, salaried class income taxpayers can make income up to Rs. 10.50 lakh per annum tax-free through one home loan alone during FY 2021-22. How can we tell…
Standard deduction of Rs 50000
There is a provision for a flat standard deduction of 50 thousand rupees for every salaried class taxpayer. It is subtracted from the total income of the taxpayer. The standard deduction was reintroduced in Budget 2018 and its limit was increased from 40000 to 50000 rupees in Budget 2019.
Upto Rs. 1.5 Lakh On Home Loan Principal
There is a provision for a tax deduction on Principal Amount of the loan under section 80C of Income Tax Act 1961. The taxpayer can claim a deduction up to Rs 1.5 lakh per annum in this section. But the condition for this is that the house for which the home loan has been taken and deduction is being claimed, cannot be sold for 5 years after the purchase. If the owner does so, then all the old deductions will be added to his income in the year of the sale of the house.
Section 24: Discount on home loan interest up to Rs 2 lakh
Under section 24 of the Income Tax Act, 1961, tax deduction on home loan interest is available under the head of income from residential property. Under this section, a tax deduction of up to Rs 2 lakh can be claimed on the interest of the home loan.
New section 80EEA
There are certain conditions for availing the benefit of section 80EEA giving additional deduction up to Rs 1.5 lakh on home loan interest, which are as follows…
- There should be no residential property in the name of the taxpayer till the date the loan is given.
- The stamp duty value of the house to be purchased should not exceed Rs 45 lakh.
- The carpet area of residential property should not exceed 645 sq ft in other metro cities including Delhi NCR and 968 sq ft in other cities.
In this way, an additional deduction of up to Rs 1.5 lakh on the interest payment under section 80EEA and a deduction of up to Rs 2 lakh under section 24, can be claimed as a total tax deduction of up to Rs 3.5 lakh on the interest payment on the home loan.