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Want to buy a home? Now save up to Rs. 3.5 Lakh on Income Tax!

This year's Union Budget had a lot of surprises for the real estate industry. Finance Minister Nirmala Sitharaman in her speech announced some mitigating points that made the middle class heave a sigh of relief. While delivering her budget speech in Lok Sabha Sitharaman extended and additional deduction to home-buyers in the affordable housing category. Let's take a look at the details of the budget.

The Union Budget 2019 states that an additional tax deduction of up to 1.5 lakhs will be applied for interest paid on housing loan up to 45 Lakhs up to 31st of March, 2020. This deduction will be over the existing deduction of Rs 2 lakhs on a home loan interest payment. The capital repayment and the interest paid on the loan qualifies for deduction under separate income tax sections if a loan availed for buying a home or constructing a home.

With an overall limit of Rs.1.5 lakhs a year, the principal repayment qualifies for deduction under section 80C of the Income Tax, 1961, whereas the interest payment on the loan qualifies for deduction under section 24(b) of the Income-tax with an effective limit of Rs.2 lakhs a year.

However, there is one more point with this amendment which states that the scheme limits the loans sanctioned in the ongoing financial year, ending on the 31st of March, 2020. The scheme will not cover the loans if the cost of the property or the home being bought is more than Rs.45 Lakhs.

While this scheme, announced in the Union Budget, has brought smiles to the people of tier-2 and tier-3, it hasn't influenced the people living in tier-1 cities due to high real estate prices. However, this scheme may prove great to the affordable homes category.