Request received - loud & clear!
Returning you to where you were...
With a number a properties being developed by a real estate builder, it often happens that a housing project gets delayed than the previously estimated development period. These delays are usually of a small duration, ranging from a few months to probably a couple of years.
But there are sometimes major delays in handing over the possession of property due to various circumstances that can jeopardise the benefits a home loan owner gets as tax deductions. To counter this the Constitution of India has Section 24(b) of the Income Tax Act that allows a homeowner claim tax deductions for 3 years of delay in property possession.
The 2016 Budget, however, introduced some changes in this section of the Income Tax Act.
To understand the changes, we need to understand what constituted Section 24(b) first. Before the 2016 Budget, Section 24(b) of the Income Tax Act allowed homeowners of any self-occupied property to get deductions worth Rs.2 lakh for the interest paid on the loan taken to purchase a property, provided the developer hands over the property to the homeowner within 3 years of procuring the loan. If the property is taken in on lease, then the limit on deductions is removed.
However, if the developer failed to hand over the possession of the property to the owner within the stipulated 3 years of getting the loan, then the deduction limit came down to Rs.30,000.
With the new changes introduced in Budget 2016, the period for which possession can be delayed has been extended from the earlier 3 years to 5 years. Homeowners with loans can now enjoy 2 more years of tax benefits in case of any delay in property possession. The amount of benefit that can be availed is still capped at Rs.2 lakh. This amendment will apply to existing and new borrowers of home loans alike.
A home loan borrower can end up losing up to 85% of tax benefits available on the home loan premium payment if the builder fails to deliver possession of the house within 5 years.
In case of delayed possession over the stipulated period, considering that the tax deduction limit over the first 5 years in Rs.2 lakh and the tax deductible limit after those initial 5 years is Rs.30,000, a home loan borrower faces a loss of: Rs.2 lakh - Rs.30,000 = Rs.1.7 lakh.
This amount of loss is equal to 85% of the savings a homeowner could have saved via tax deductions.
This new amendment brings about greater relief to those already going through the harassment of not getting their properties handed over to them.
Home loan borrowers can use their savings on tax for these 2 years to invest in some sound financial prospect or to pay of some of their loan debt.
Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.