Home loan benefits | Banks offering home loans at historically low rates: Here

New Delhi: If you have been planning to take a home loan, now might be the best time for you to do so. In the last few days, various banks have reduced their home loan interest rates for borrowers.

HDFC, for instance, has reduced its Retail Prime Lending Rate (RPLR) on housing loans by 5 basis points, effective from 4 March 2021. Similarly, the State Bank of India (SBI), ICICI Bank and Kotak Mahindra Bank have also reduced the interest rates on home loans.

Experts say this will benefit new borrowers as the rate cuts will only be applicable for them and not to the existing borrowers. If the RBI brings a cut in the repo rate, the existing borrowers can benefit, as the repo rate linked to home loan is calculated on the repo rate, plus the spread or margin of the bank.

Payments made towards the principal component

Payments made towards the principal component of the housing loan borrowed for the purchase/construction of the house property qualifies for deduction under the limit of Rs 1.5 lakh of Section 80C. However, this deduction will be reversed if the property on which deduction is claimed is sold within a lock-in period of 5 years from the date of purchase.
Also, any expenses incurred in respect to the stamp duty, registration charges, or any other charges directly related to the transfer of the property is allowed as a deduction under the overall limit of Rs 1.5 lakh of section 80C. This deduction is allowed only in the year of actual expenditure.

Deduction on home loan interest

Under Section 24 (b) of the income tax act, the taxpayer can claim a deduction of ₹2 lakh against the interest paid on home loan in case of a self occupied property. The deduction is available only after the construction of the house is complete.

Section 80EE

Section 80EE was introduced from FY 2017-18 as an additional deduction up to Rs 50,000 as against the interest payable on loan taken for the purpose of acquisition of a house property subject to the following conditions:

• The loan has been sanctioned by Financial institution during the financial year 2016-17
• The amount of loan sanctioned is less than Rs 35 Lakhs
• The value of the residential property does not exceed Rs 50 Lakhs
• The assessee is the first time owner of the house property as on the date of sanction of the loan
• If any deduction is claimed under this section, no deduction shall be allowed of such interest under any other provision.
• The interest deduction under section 80EE is available until the repayment of the loan, subject to satisfying the above conditions. The interest deduction continues to be available for an individual whose loan was sanctioned within the limits and conditions prescribed in section 80EE.

Section 80EEA
Section 80EEA has been further introduced from FY 2019-20 also to extend and enhance the benefits allowed under Section 80EE for low-cost housing.

• This section allows an additional deduction up to Rs 1,50,000 for interest payable on a home loan taken subject to the following conditions:
• The assessee must be an individual.
• The loan is sanctioned by the Financial institution or housing finance company between 1 April 2019 and 31 March 21 (one-year extension granted beyond 31 March 2020 in Budget 2020)
• The value of the residential property does not exceed Rs 45 Lakhs.
• The assessee is the first-time owner of the house property as of the date of sanction of loan.
• The individual should not be eligible to claim interest deduction under section 80EE.

Meanwhile, Union Finance Minister Nirmala Sitharaman on November 12 announced income tax relief for developers and home-buyers in order to boost the demand for residential real estate in the country. The first-time buyers of houses costing up to Rs 2 crore…