3 New Home Loan Tax Benefits You Should Avail for FY 2016-2017

Money – the necessity, the wonder and yet the evil! Did we manage to give the full picture? Whatever! Talking of money, saving this evil is really necessary in the times when money speaks and inflation hits like A-bomb. But sadly, with limited income and inflationary pressure, we seem to always run short of money. Way out? Savings!

Just how many ways of savings are there? Several actually! Here is how you can save:

Open savings bank account and keep depositing money on a monthly basis.
Invest money in insurance, FD, PPF, EPF, Mutual Funds, KVP (Kisan Vikas Patra), SCSS (Senior Citizen Savings Scheme) etc.
Tax savings from investments, etc.

There are many more methods but since we are not interested in discussing those things here, we will stop and focus on the issue in hand.

3 New Home Loan Tax Benefits You Should Avail for FY 2016-2017

Home – isn’t that sweet! All the sweetness is lost when we look at the real estate prices. Sometimes, even the cheapest of real estate properties are sold at such inflated rates that they become out of reach of common people. We still buy and we resort to home loans in general (unless you are filthy rich and don’t care about taking out loans).

Did you know that when you take out home loans, you are entitled to some tax benefits? These tax benefits existed for long but in Union Budget of 2016, three (3) new tax benefits were announced on home loans. These three tax benefits (depending on whether you are eligible for such benefits or not), will help you to save some expenses in form of tax payments. So, in case you are planning on filing your income tax returns now or in near future and you have a home loan, consider availing these benefits in case you are eligible.

Also, remember, in case your paycheck doesn’t include HRA or Home Rent Allowance, you may just be eligible for increased tax relaxation. So, don’t forget to check out the same.

So, what are those tax benefits? Let’s find out…

Benefit 1: Additional Tax Break Up To 50,000

Big Condition: YOU MUST BE A FIRST-TIME HOME BUYER

In case this condition is satisfied, and you took a home loan in FY 2016-2017, you will be given additional tax break of up to Rupees 50,000. This tax benefit has been introduced in section 80EE as spelled out in 1961’s Income Tax Act.

Current scenario: In the current scenario, Section 24 of Income Tax Act states that if a person is paying interest on home loan, he or she will enjoy tax benefits on the paid interest. The interest must be paid out of pre-tax annual income. However, a limit of Rupees 2 lakhs applies on the amount of tax benefit that one can get has been set by the law.

This new tax benefit of up to Rupees 50,000 is set on over and above the existing limit of Rupees 2 lakhs.

Hold your horses…

If you do not fulfill the criteria, you cannot get the tax break. So, here are the eligibility criteria that you should be aware of before you go and start claiming:

YOU SHOULD BE A FIRST-TIME HOME BUYER.
YOU SHOULD BE RESIDING IN THE PROPERTY. IN CASE YOU ARE PLANNING ON RENTING OUT THE PROPERTY, YOU WILL NOT BE ELIGIBLE.
THE AMOUNT OF LOAN YOU ARE TAKING OUT CANNOT, UNDER ANY CIRCUMSTANCES, EXCEED RUPEES 35 LAKHS.
THE PROPERTY VALUE CANNOT EXCEED RUPEES 50 LAKHS.
THE LOAN SHOULD BE TAKEN OUT WITHIN FISCAL YEAR 2016-2017 (THAT IS, BETWEEN 1^ST APRIL, 2016 AND 31^ST MARCH, 2017).
THE BENEFIT AMOUNT CANNOT EXCEED RUPEES 50 THOUSAND.

Benefit 2: Time Frame for Deduction Claims Has Been Increased

It was a rule that if, interests up to INR 200,000 (that is 2 lakhs) is deducted from a home buyer’s annual gross income, it was mandatory to get possession of the house within three years counted from fiscal year’s end in which the home buyer took out the loan.

The Union Budget of 2016 gave a relaxation in this as well. Now, instead of 3 years, people will get a time limit of 5 years counted from fiscal year’s end in which the home buyer took out the home loan.

This means that in case first-time home buyers who are supposed to get possession in this current year (that is, 2017), they will get some relief in case the builders fail to hand over possession to the home buyers within the promised time. Under the previous rule, if the builders failed to hand over possession within 2017, the home buyers would not be able to enjoy the tax deductions or tax break.

Benefit 3: Benefit in Case HRA is Not Paid by Employer: Rationalization of Rent Limit

There is rule in income tax under which, if a person is not paid HRA by his or her employer and the person actually needs to pay rent for a house – furnished or non-furnished, he or she can get tax exemptions under 80GG. For deductions to become applicable a condition has to be satisfied. This conditions is that any amount above 10% gross monthly paid towards rent will be applicable for tax breaks. The amount of tax break that will be provided will be lower of either 25% of total yearly income or Rs. 2,000 for a single month. The Union Budget of 2016 rationalize the tax break about and increased it to Rs. 5,000 from existing Rs. 2,000. This change reflected the adjustment for inflationary pressure.

So, if you are a first-time home buyer and you satisfy any of the above conditions or all of them, you can go ahead and enjoy the new benefits. So, when you file your ITR for the current fiscal year, take account of these three benefits and save some money. After all, money is a precious evil without which no one can live.

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