Borrowers who have not received their homes due to a delay on the builder’s end need not fear losing out on the tax benefits on their home loans. Currently, the government allows a deduction of up to Rs. 2 lakhs for the interest paid on housing loans to purchase a house for personal use if the possession is granted within three years from the end of the financial year in which the loan was taken.
The 2016 Union Budget has increased this tenure to five years, a much needed change considering most residential properties currently take longer than three years for completion. Up until this revision, many people would lose their tax benefits, rising up toRs. 5,000 per month depending on their tax bracket. This change will come into effect by April 1st 2017 and will be applicable from the assessment year FY18.
Clause B of Section 24 of the Income Tax Act states the two conditions which need to be met for tax benefits on housing loans to be claimed. The first condition is that the loan must be taken on or after April 1st 1999 and the possession or completion of construction must be within three years of the end of the financial year in which the loan was taken.
Trends these days show that nearly 75% of home constructions, like in the NCR region, are delayed for more than three years and this phenomenon is only increasing further. Due to this, the demand for under construction property has reduced and the prices of ready-to-move-in homes have increased significantly, going out of budget for most buyers. This change in waiting tenure looks to bring back the appeal for under-construction homes.