Home loans have always been one of the biggest prerogatives for the country. With the new incentives and policies introduced by the government, availing the same has become relatively easier. Hence, to benefit the most from these new amendments, borrowers must get themselves equipped with the knowledge about the following updates.
Home Loan Benefit’s
1. Inclusion of repo-linked interest rates
The recent introduction of repo-linked interest rates by the government has imparted a new lease of life to this arena. With repo-linked interest rates in place, lenders can be assured of a higher level of transparency, rapid transmission of repo rate cuts, and easier comparison of loans.
This new increase in transparency and faster transmission of rates to the borrowers has been facilitated by means of MCLR. Due to these newly introduced repo rates, the RBI rate is now at 5.4%, which considerably reduces the home loan EMI.
2. Government policies
The increase in the number of loan beneficiaries can also be attributed to other incentives put forth by the government, including Pradhan Mantri Awas Yojana (PMAY) and Real Estate Regulation and Development Act. The government has already sanctioned 65.43 Lakhs houses under the PMAY urban scheme. In addition to this, the credit-link subsidy scheme is further slashing the interest rates and allowing beneficiaries to rethink their benefits from a whole new perspective. Further, the Real Estate Regulation and Development Act is enabling investments in real estate by safeguarding the investors.
3. Impact of the moratorium on a home loan on tax benefits
It is of common knowledge that opting for a moratorium on term loans does impact tax benefits. But in the case of a home loan, it takes another dimension. Moratorium on interest payment on the home loan will further impact the tax benefits.
Notably, under section 24(b), interest payment on a home loan of Rs. 2 Lakhs in one financial year is eligible for a tax deduction while the principal repayment of Rs. 1.5 Lakhs is eligible under Section 80C of the Income Tax Act as per the old regime. However, opting for a half-year moratorium will reduce both the principal repayment as well as the interest payment for the ongoing financial year. This will directly impact the tax deduction amount on the principal repayment.
Along with this, if the annual interest falls below the Rs. 2 Lakhs benchmark, the beneficiary will get an additional tax deduction under Section 24(b) since the total interest exceeds the amount to be paid without opting for the moratorium.
4. Pandemic relief
Looking at the COVID-19 situation, the government has come up with certain extensions on various deadlines to help stabilize the economic front. For instance, the government has announced the inclusion of another fiscal year in the availability of PMAY subsidy rates for middle-class households with annual income in the range of Rs. 6-18 Lakhs.
With these new incentives and updates, a dream home is no longer a far-flung dream anymore.