By introducing an additional deduction of Rs. 50,000 in the Budget proposal, Finance Minister Arun Jaitley has given the first time home buyers a reason to cheer.
This additional deduction has been given on interest for loan up to Rs. 35 lakh provided the house value doesn't exceed Rs. 50 lakh.
An additional deduction was much awaited as the costs of housing units have increased much over the recent years.
A home buyer in India is entitled to claim both the interest and principal components of home loan repayments for tax benefits. Currently interest payable on a self-occupied house is subject to a maximum deduction of Rs. two lakh under the head 'Income from House Property', under Section 24(b).
Taxpayers and industry experts were expecting the government to increase the tax deduction limit for housing loans, especially in metropolitan cities, by about Rs. one lakh to Rs. three lakh as the current limit of Rs. two lakh is insignificant.
Besides interest, the portion of one's EMI, which goes towards principal re-payment will now be allowed a claim under Section 80C.
This amount can be claimed within the overall limit of Rs. 1,50,000 under Section 80C.