Budget 2016: Possession period for property raised to 5 years to avail tax benefit on home loans

By: | Published: February 29, 2016 6:28 PM

Finance Minister Arun Jaitley announced tax relief on interest payment on home loan if the property bought or under construction is completed within 5 years from the end of the financial year in which the loan has been availed instead of the current 3 years.

home loan - union budget 2016 highlightsUnion  Budget 2016: Finance Minister Arun Jaitley announced tax relief on interest payment on home loan if the property bought or under construction is completed within 5 years from the end of the financial year in which the loan has been availed instead of the current 3 years. (Photo: Thinkstock)

In a relief to those who have availed home loans , Finance Minister Arun Jaitley in his Union Budget announced tax relief on interest payment on home loan if the property bought or under construction is completed within 5 years from the end of the financial year in which the loan has been availed instead of the current 3 years.

This will come as a major relief to home-buyers, who have been unable to avail of this benefit due to delay in project completion. The real estate sector has been plagued with low offtake of inventory and consequent cash crunch causing delays in handing over of properties to end-users.

The extension of the period for acquisition/possession of property from three 3 to 5 years had been one of the major demands of the real estate sector. Boman R.Irani, chairman and managing director, Rustomjee Group, real estate developers, had said that the denial of this tax benefit was hurting home buyers. “On account of several delayed approvals most of the projects take more than 3 years to complete,” he said.

The existing provision of Clause (b) of section 24 provides that interest payable on capital borrowed for acquisition or construction of a house property shall be deducted while computing income from house property.

It also provides that a deduction of Rs 2 lakhs shall be allowed where a house property referred to in sub-section (2) of section 23 (self-occupied house property) has been acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within three years from the end of the financial year in which capital was borrowed.

“In view of the fact that housing projects often take longer time for completion, it is proposed that second proviso of clause (b) of section 24 be amended to provide that the deduction under the said proviso on account of interest paid on capital borrowed for acquisition or construction of a self-occupied house property 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 Finance Minstery has said in its Budget papers.

The amendment will take effect from April 1, 2017 and will, accordingly apply from assessment year 2017-2018 and later.

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