#UnionBudget2016: FM Announces Tax Exemption For First-Time Home Buyers

Finance Minister Arun Jaitley presented the Union Budget 2016-17 today (29 February) at Parliament. He announced changes across different sectors, including real estate. One of the major announcements he made for the real estate sector was the tax exemption for first-time home buyers. The first-time home buyers will now get an additional tax deduction of Rs 50,000. The deduction will be given on interest for loan up to Rs 35 lakh, wherein the cost of the house shall not exceed Rs 50 lakh.

According to the rule for a self-occupied property, under Section 24 (b), under the head 'income from House Property', a house owner could avail a deduction of Rs 2 lakh towards the interest paid on home loan. This deduction limit has now been raised to Rs 2.5 lakh.

However, Jaitley did not introduce any changes in the tax exemption given on the principal amount of the home loan. The tax exemption on the principal amount of home loan is Rs 1.5 lakh under the Section 80 C of the Income Tax Act. The increase in deduction limit in interest, a first time home buyer can now avail a cumulative tax exemption of up to Rs 4 lakh; up to Rs 1.5 lakh on principal amount, and upto Rs 2.5 lakh on interest amount.