Rs 50k additional deduction for first-time home buyers

First time home buyers will get an additional deduction of Rs 50,000 on interest on loans. 

Aiming to boost demand in the realty sector, the government’s proposal comes with tax incentives on development of affordable housing and exempting Real Estate Investment Trusts (REITs) from dividend distribution tax.

The government also exempted from service tax construction of affordable houses up to 60 sq metres under any scheme of the central or state government including public-private partnership schemes.

The real estate sector, particularly housing segment is facing a huge slowdown for the last 2-3 years, resulting in a huge delay in delivery of projects to customers and piling up of unsold inventories.

Listing promotion of affordable housing as one of the thrust area, Finance Minister Arun Jaitley in his Budget speech said: “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.”

At present, Rs 2,00,000 deduction is allowed for interest paid on home loans.In a relief to individual tax payers, Jaitley also increased the tax deduction limit to Rs 60,000 per annum from the current Rs 24,000 on housing rent.

To boost supply of affordable homes, he also proposed 100% deduction for profits to an undertaking from a housing project for flats up to 30 sq metres in four metros and 60 sq metres in other cities.