The federal government will end the income tax incentive under Section 80EEA for first-time house purchasers on April 1, 2022. In Budget 2019, the government granted an extra 1.50 lakh income tax advantage for home loan borrowers who purchase their first home with a stamp duty valuation of up to 45 lakh. This facility was later extended for one more year in 2020 and 2021, respectively. However, tax and investment experts state that if a new house loan borrower receives a home loan sanction letter before March 31, 2022, and receives disbursement in FY23, they will be entitled to claim this extra income tax exemption advantage for the whole term of the home loan.
Balwant Jain, a Mumbai-based tax and investment expert, explained how an income taxpayer can still claim this benefit when filing an income tax return (ITR) “A taxpayer will not be able to claim income tax benefits under Section 80EEA when filing ITR for the next fiscal year because this tax benefit expires on March 31, 2022. However, suppose a taxpayer is considering purchasing a dream house in the coming fiscal year. In that case, they may still take advantage of the income tax exemption on up to 1.50 lakh in home loan interest payments in a single fiscal year.”
Balwant Jain, highlighting the window of opportunity open to income taxpayers, stated, “If a house loan is sanctioned between April 1, 2019, and March 31, 2022, the borrower may claim income tax benefits under Section 80 EEA. So, if a new borrower receives a house loan approval letter before March 31, 2022, and receives disbursement in the next fiscal year, they would be able to claim an income tax credit of up to 1.50 lakh on home loan interest paid in a single fiscal year under Section 80EEA.”
Pankaj Mathpal, MD & CEO at Optima Money Managers, agreed with Balwant Jain “This option would be offered to a house loan borrower throughout the loan if the borrower is a first-time buyer and does not own any property. Most crucially, this advantage is applicable to house loan EMI repayments for under-construction properties. Still, under Section 24(b), a home loan borrower can claim income tax benefit on up to 2 lakh interest payments made after taking possession of the property.”
According to the income tax laws, a house loan borrower will receive two income tax benefits beginning April 1, 2022, under Sections 24(b) and 80C of the Income Tax Act. A house buyer can claim an income tax deduction of up to 2 lakh on the interest component of its home loan EMI under Section 24(b) in a single fiscal year. This advantage, however, can only be claimed after the property has been acquired. Borrowers can claim a tax deduction of 1.5 lakh on the principal amount paid through house loan EMIs under Section 80C.