Finance Minister Nirmala Sitharaman has not given any new exemption in income tax to the buyers buying houses in the budget 2021. But the exemptions already being given have been extended by one year till 31 March 2022. You know how much you can take advantage of them and how many installments will come on the loan of how many rupees.
Two parts of the EMI- Principal and Interest
First, let us understand what kind of tax exemption is available on home loans. The monthly installment of a home loan has two parts – principal ie principal amount and interest ie interest. You can get a discount of up to Rs 1.5 lakh on the principal. This exemption is found in section 80C of the Income Tax Act. But there is a screw here.
Tax exemption on principal up to Rs 1.5 lakh
Section 80C also covers the rebate available on many other expenses. Important investments like National Pension Scheme (NPS), Equity Linked Savings Scheme (ELSS), Public Provident Fund (PPF), Sukanya Samriddhi Yojana also come. It also includes children’s tuition fees and life insurance premiums.
There is a discount of up to three and a half lakh rupees on interest
Now let’s talk about the interest part. There can be tax exemption in two sections. Section 24 gets tax rebate on interest up to two lakh rupees. If you are buying the first house, in Section 80 EEA, you will get a rebate of up to Rs 1.5 lakh separately.
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Less tax exemption on interest on houses up to 50 lakhs
It also has a screw. This discount will be available only if the price of your house is up to 45 lakh rupees. Actually, the government is giving this rebate on affordable houses. In such a situation, if you take a house up to 50 lakh rupees, this discount will be reduced to 50 thousand rupees. Because its section will be changed from 80 EEA to 80 EE.
Total tax rebate of 5 lakh on income tax
In this way, you can get a maximum exemption of Rs 5 lakh in income tax on the loan of cheap homes. The thing to keep in mind here is that if the house is expensive than Rs 45 lakh but cheaper than Rs 50 lakh, then the discount you get will be Rs 4 lakh.
How much EMI will be , how much loan can be taken
It has become a matter of income tax exemption from home loan houses. Now we see how much loan you can take for cheap house and how much EMI can be made for you. To understand this, let us take an example.
40 thousand rupees loan installment of 26 thousand
Let’s say that you are taking a loan of Rs 40 lakh for a house of 45 lakh rupees. If you charge seven percent interest on this, then your installment of a month on a 30-year loan will be 26 thousand rupees. In this, an installment of Rs 3.20 lakh will be made in the first year, whose interest will be Rs 2.80 lakh and principal will be Rs 40 thousand. In this way, you will be able to take advantage of a large part of the tax rebate on interest in the first year.
Total payment of Rs 95.80 lakh on 30 year loan
The total amount of money you will pay back to the bank or housing finance company on this home loan is also known to you. A total of Rs 95.80 lakhs will come out of your pocket on a 30-year loan, of which 55.80 lakhs will be interest.
