india

Updated: May 28, 2020 22:45 IST

If you purchase a house of value up to Rs 45 lakh on loan by 31 March 2020, you will get an additional deduction of Rs 1.5 lakh for interest paid on loans. Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to Rs 3.5 lakh, according to the finance minister’s speech.

The move is to improve real estate demand.

“The economy is slowing down and consumption is at a 20-quarter low coupled with a liquidity crisis,” said Chawla. Apart from this new proposed deduction, the interest paid on housing loans was already allowed as a deduction to the extent of Rs 2 lakh but for ‘self-occupied property’. Will the interest component go up to Rs 3.5 lakh?

“Let’s say you bought a house for Rs 45 lakh and took a loan of Rs 20 lakh at 9% interest rate. The EMI will be around Rs 20,285 for a 15-year period in which around Rs 15,000 per month—annual interest outgo of Rs 1.8 lakh. However, if you take a Rs 40 lakh loan, your EMI will be around Rs 40,571, Rs 30,000 and interest component adds up to Rs 3.6 lakh in a year. In this case, the annual deduction of Rs 3.5 lakh will come in handy. ” said Sadagopan.