Finance Act 2016: Tax benefits for home purchase and hire paid

Posted on Sep 19 2016 - 11:49pm by lepocha

The finance invoice, changed into offered within the parliament on February, 29, 2016. It has become a law, after receiving the president’s assent, from may additionally 14, 2016. This Finance Act 2016, has certain provisions, for you to gain individual tax payers, vis-à-vis home mortgage interest and rent paid. Extension of time for completion of construction till now, a tax payer, who borrowed cash for an underneath-creation property for his very own residence, become eligible to claim Rs two lakhs, starting from the yr wherein production changed into finished and ownership taken. But, to claim this tax advantage on hobby usa24(b), construction of the residence was required to be finished within 3 years, from the end of the monetary 12 months wherein the money turned into borrowed, failing which, the entitlement for interest for reserving an below-production assets used for self-career changed into decreased to Rs 30,000. Owing to rampant delays in construction and handing over possession by way of developers, beyond the 3 years, many tax payers were not able to avail of the overall blessings.

To mitigate such worry to tax payers, the length for of completion of creation, has been prolonged to five years, from three years. Additional benefit for interest on home mortgage taken by way of a first-time home buyer below section 80EE, an man or woman who borrows cash for the reason of purchasing a house, gets a further deduction of Rs 50,000 from his income, if certain conditions are satisfied. The first situation for claiming this gain, is that the individual tax payer have to not own any house on the date on which the home loan is sanctioned. Secondly, the quantity of home loan have to know not exceed Rs 35 lakhs, for a house which does not value more than Rs 50 lakhs. Moreover, the loan have to be sanctioned among April 1, 2016 and March 31, 2017. This additional deduction of Rs 50,000 is to be had in admire of an below-creation assets, even at some stage in its creation length, because the supply does no longer require that the development of the residence for which the mortgage is taken must be finished, in contrast to segment 24(b) wherein you could begin claiming the hobby deduction, handiest from the 12 months in which the development is completed.

This can be useful, for folks who are shopping for a property for self-use and where the most allowable hobby is restrained to Rs lakhs, inclusive of the pre-EMI interest which you could claim in 5 equal annual instalments, beginning from the year crowning glory of creation. More advantageous tax advantages for rent paid segment 80GG affords for tax comfort to folks who are salaried and are not in receipt of any residence lease allowance (HRA) from their employers, or are self-hired, with respect to the hire paid for any lodging occupied by way of them. The deduction is authorized, simplest if the tax payer, or the spouse, or minor baby, do now not own any residential accommodation within the vicinity wherein he broadly speak is living. Furthermore, the tax payer must not very own a residential house at every other area, that is dealt with as self-occupied for tax functions. The amount of deduction to be had, is the excess of lease paid over 10% of overall profits, situation to 25% of the total profits. In advance, the deduction changed into confined to Rs 2,000 in step with month. This low restriction didn’t provide any essential advantage for the tax payers, who had been paying huge quantities as rent. The Finance Act 2016, has raised the ceiling from Rs 2,000 in keeping with month to Rs 5,000 in step with month.