According to current tax laws, if possession of the house is received more than three years from the end of the financial year in which the housing loan was taken, then only interest of Rs.30,000 is deductible each year, and not Rs.2 lakh.
Finance Minister Arun Jaitley in the Budget proposed to increase the time period to five years, meaning that a home buyer will be able to claim interest deduction of Rs. 2 lakh if the construction of the house is completed within 5 years. This rule is applicable in case of self-occupied property.
Experts welcomed the move, saying that there was a need to increase the time period due to widespread delay in property construction. “There are close to 25 lakh flats that have launched since 2008, of which 42 per cent have been delayed for more than 2 years,” says Pankaj Kapoor, managing director, Liases Foras, a Mumbai-based real estate research firm.
“The government has realised that the home buyers were getting penalised for no fault of them,” says Mayur Shah, tax partner, People Advisory Services, EY.
The budget has also announced an additional interest deduction of Rs. 50,000 for first time home buyers on loan of up to Rs. 35 lakh, provided the value of property is up to Rs. 50 lakh.
