If you take a home loan, EMI has two parts. There is a benefit under section 80C on the principal amount. There is a benefit under 24B and section 80EEA on interest amount.
As we know, there is a tax relief from the government on home loans. Most people come away from home for jobs in big cities. In such a situation, everyone wants to have a house in the city where he works. Because of motivating people for this, the government provides huge relief in tax on home loans. Although no major relief for taxpayers was announced in Budget 2021, but a big announcement has been made about home loans. Under this declaration, even if your salary is up to 10.50 lakh, one rupee tax will not be levied.
In the Budget 2021, Finance Minister Nirmala Sitharaman has increased the deadline for section 80EEA from 31 March 2021 to 31 March 2022. The government brought section 80EEA in the budget 2019 for affordable housing. At that time the deadline of this scheme was till March 2020. In the budget 2020, its deadline was increased to March 2021. Once again its deadline has been extended for a year. Under this section, there is a separate exemption of 1.5 lakh in tax on the interest repayment of home loan. This exemption is different from section 24B. Under Section 24B, there is a rebate of Rs 2 lakh on interest repayment of home loan. Explain that deduction under section 80C will be available on the principal amount repayment of home loan. Its limit is 1.5 lakh rupees.
Know how will tax calculation
Now talking about tax calculation, let’s say A’s salary is 10.50 lakh rupees. According to the old tax rules, it comes in a 30 percent tax slab. In the new tax rules, it comes in 20 percent tax slab. However, no deduction is available in the new tax slab. According to the old rule, standard deduction of 50 thousand rupees will be available.
– Standard deduction – 50000 rupees. (1050000-50000 = 1000000)
– Net income after removal of standard deduction 10 lakhs.
– 1.5 lakh exemption on principal amount repayment under section 80C. (1000000-150000 = 850000)
– Now, under Section 24B, there will be a discount of 2 lakh on interest repayment. (850000-200000 = 650000)
– 1.5 lakh exemption under section 80EEA after section 24B. (650000-150000 = 500000)
In this way, after availing deduction in principal amount and interest repayment of home loan, A’s net income was Rs 5 lakh. As we know, the tax rate between 2.5 lakh to 5 lakh is 5%. (Tax liability at the rate of 5% is Rs. 12500), but according to the rule, every taxpayers gets a rebate of Rs. 12500. In this way A’s total tax liability became zero.
Benefit will be given only on affordable housing up to 45 lakhs
It is also important to understand that there are some conditions to take advantage of section 80EEA. This is for first time home buyers only. The first condition for availing section 80EEA is that the stamp value of the house should not exceed 45 lakhs. For this, the carpet area should not be more than 60 square meters or 645 square feet. This condition is for metro cities which include cities like Delhi, Mumbai, Bangalore, Noida, Gurugram, Hyderabad, Kolkata. The carpet area for other cities can be a maximum of 90 meters or 968 square feet.
Profit taking condition
According to the old rule, Section 80EEA will be benefited only if a real estate project is approved before September 1, 2019. When the time limit has been extended to take advantage of this, then it is possible that the time limit should be extended. At present, there is no specific information about the deadline of the real estate project. Explain that taxpayers will have to take full advantage of section 24B, only then they can take advantage of section 80EEA.
