Union Budget 2021-22: The budget has two proposals that intend to extend home buyers’ tax benefits.
Extension of time limit for availing home loan to buy a house
Presently an individual is entitled to claim deduction of interest paid on a loan taken from financial institutions to buy a residential house property under Section 80EEA provided the value of the house does not exceed Rs 45 lakh as per the stamp duty valuation. This deduction was available only if the home loan was sanctioned between 1st April 2019 and 31st March 2021. Since the real estate sector is facing problem, the government has decided to extend the date beyond 31st March 2021 and now you will be able to avail this benefit for loans sanctioned by 31st March 2022.
This benefit is available provided the buyer does not have any residential house on the date of sanction of the home loan. Though one is entitled to deduction of Section under 24(b) for interest on money borrowed from anyone,t the benefit under Section 24(b) becomes available only if the buyer has obtained possession of the house or construction is completed in case the house has been purchased is self-constructed.
In contrast, the deduction under Section 80EEA can be claimed even regarding interest paid on such a home loan even during the construction period. Though one is entitled to amortize the interest paid during the construction but looking at the restriction of Rs 2 lakh for self-occupied property and limitation of Rs 2 lakh of loss against other income during the year and looking at the amount of home loan nowadays required to be taken for buying property in big cities, home buyers are hardly able to claim the amortized portion of interest effectively. So this is a welcome proposal.