Dealing With Delays: Budget Gives Home Buyers A Reason to Breathe Easy

In the current Budget, tax relief on interest payment on home loan for ready-to-move-in and under-construction projects in India has been raised from three years to five years. The Finance Bill 2016-17 under Clause 10 has made these changes to Section 24 of the Income Tax (I-T) Act and it will be effective from April 1, 2017.

Section 24 (b) earlier stated that where acquisition or construction of a property is completed within three years from the end of the financial year in which capital was borrowed, the amount of deduction under Sec 24 (b) should not exceed Rs 2 lakh.

The original version

Section 24 of the I-T Act deals with deduction available in computing income from house property. The deduction can be claimed for acquisition, reconstruction, repair or renewal of the house. To avail of the tax benefit under Section 24, you have to prove that the expenditure was incurred from capital borrowed on or after April 1, 1999. You are also required to furnish a certificate from the person to whom any interest is payable on the borrowed capital. The certificate should specify the amount of interest payable for the above mentioned purpose.

Why is this important?

In the recent times, homebuyers often failed to avail of tax benefits under Section 24 due to delays in project completion. Developers, on the other hand, have been unable to meet delivery deadlines due delays in government approvals and increasing construction costs. This has resulted in credit crunch in the real estate sector and delayed project deliveries. As a rippling effect, home buyers on the one hand have to pay rents along with equated monthly instalments, they also lose out on tax benefits on the other hand. In a scenario like this, the government decision would provide relief to home buyers and developers in equal measures.