With the advent of the notorious Covid-19 pandemic, the entire home loan landscape has witnessed quite a transformation. From interests going lower than ever to property rates reaching sky-mile levels, it has been a roller-coaster. However, as we ring in the new year, this area is yet to undergo numerous other changes.
While the entire section of home loan eligibility and documentation procedures have pretty much remained the same, the 2021 tax regime is set to create quite a few alterations for home financing interest. Let’s dive deep into this and take a better look.
Extending the affordable housing loan availability
The “Housing for All by 2022” has been one of the primary focal points for the Indian government. To that end, the deadline of availing affordable housing schemes has been extended till March 31, 2021.
However, there’s more. According to the current income tax regime, individuals can claim their housing loan interest as a deduction from their total gross income, availing a maximum of INR 3.5 lakh interest under the affordable housing scheme. This is a significant shift in the tide, as earlier, this cap remained at INR 2 lakh, and the additional 1.5 lakh will now provide homeowners with much-needed assistance to purchase their property.
Lenders offering a record-low interest rate
With the RBI reducing the repo rate to 4%, most financial lenders today offer home loan interest rates at the sub-7% level, a record 15-year low.
However, it seems like home loan EMI rates will remain in this section for some time now. This is mainly because of the RBI strictly maintaining a status-quo on the 4% repo rate. Since the near future doesn’t seem to have any reductions in this, lenders will stick to providing interests at the same percentage they are offering now, which are incredibly affordable, to begin with.
Tax benefits on housing loans
The housing finance interest deductions are probably among the most significant changes that the 2021 tax regime will bring. Here are the details according to the income tax act: –
- Under Section 80C, people can claim maximum deductions of INR 1.5 lakh for their financial year’s principal repayment.
- Under Section 80EEA, individuals can claim up to INR 1.5 lakh of interest payment deductions on housing loans, which they’ve taken during the financial year.
- Under Section 24B, individuals can claim a maximum deduction up to INR 2 lakh for interest payment and accrual on home loans.
- Under Section 80EE, people can claim a maximum deduction of up to INR 50,000 for housing loan interest, if taken during the 2016-17 financial year.
- For joint home financing, borrowers can claim principal repayment (section 70C) and interest payment (section 24B) deductions if they’re the property’s co-owners.
2021 is the year to invest in new properties
If you’ve been looking to own a new home, now is the best time. With the new tax regime setting interest rates low, and online lenders offering home loan EMI calculators, you have all the tools at hand. Check the EMI schemes that suit you best, and get started on your dream house!