To lower the burden for first-time home buyers, Finance Minister Arun Jaitley in Budget 2016 announced an additional income tax deduction of Rs 50,000 on the interest paid.
The first-time home buyer will get this additional deduction in the next financial year only if the loan amount is less than Rs 35 lakh and the value of the property is less than Rs 50 lakh, Mr Jaitley said. This will be applicable where loans are sanctioned during the next financial year.
"For the 'first - home buyers', I propose to give deduction for additional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned during the next financial year, provided the value of the house does not exceed Rs 50 lakh," the finance minister said in his budget speech.
Currently, deduction of Rs 2 lakh per year is allowed on the interest paid on home loan in case of self-occupied property. After this new announcement, the deduction on interest for first time home buyers will go up to Rs 2.5 lakh.
This move will mostly benefit first-time home buyers in non-metro cities, say experts. "This announcement will mostly benefit first-time home buyers in tier-III and tier-II cities," said Anuj Puri, chairman & country head, JLL India.