Those fearing loss of tax benefit on their housing loan because the builder has delayed delivery of their apartments will get some respite.
At present, the government allows a deduction from income of up to Rs 2 lakh for interest paid on a loan taken to purchase of a house for own use if one gets possession within three years from the end of the financial year in which the loan was taken.
The Union Budget 2016 has extended this limit to five years.
“This was an anomaly We have corrected it,” a finance ministry official said. With most residential property projects now taking more than three years to get completed, many tax payers risk losing this benefit that works out to over Rs 5,000 per month for those in the highest tax bracket.
The proposed change will, however, be applicable from April 1, 2017, that is, it will apply in relation from assessment year FY18.
Under the current rules, the tax benefit on housing the tax benefit on housing loan interest under the Clause (B) of Section 24 of the Income Tax Act is subjected to two conditions being met.
One, the housing loan has to be take on or after April 1, 1999. And two, the acquisition or construction is completed within three years from the end of the financial year in which the loan was taken.
“In view of the fact that housing projects often take longer time for completion, it is proposed that” this benefit “shall be available if the acquisition or construction is completed within five years from the end of the financial year in which capital was borrowed,” the budget said.
According to some estimates, nearly 75% of projects in the NCR region are delayed more than three years. Nationally, too, the percentage of delayed projects is very high. Because of this delay and risk in execution, the demand for under-construction properties has fallen while prices of ready-to-move property have gone beyond budget for most buyers.