Union Budget 2019 India: Finance Minister Nirmala Sitharaman didn't increase tax slabs or 80C deduction limit, but imposed additional surcharges instead on taxable income of over Rs 2 crore.
Union Budget 2019-20 India: The Budget 2019 delivered little joy in terms of income tax relief as India’s first woman Finance Minister Nirmala Sitharaman didn’t increase tax slabs or 80C deduction limit, but imposed additional surcharges instead on taxable income of over Rs 2 crore.
However, introduction of two new sections to provide tax deduction on interest paid on loan taken for buying an electric vehicle (EV) and additional deduction on home loan taken to buy an affordable house would result into considerable tax savings for tax payers, who avail the benefits.
Under the proposed section 80EEB, deduction up to Rs 1.5 lakh may be claimed on interest paid on auto loan taken to buy an electric vehicle, provided that the loan has been sanctioned during the period beginning on the April 1, 2019 to March 31, 2023 by a financial institution including an NBFC and the assessee shouldn’t have another electric vehicle on the date the loan was sanctioned.
Similarly, under the proposed section 80EEA, additional deduction up to Rs 1.5 lakh may be claimed, along with the provision of existing deduction limit of Rs 2 lakh u/s 24 of the Income Tax Act, on interest paid on home loan taken for buying an affordable house of value up to Rs 45 lakh, provided that the loan has been sanctioned by a financial institution during the period beginning the April 1, 2019 to March 31, 2020 and the assessee doesn’t own any residential house property on the date of sanction of loan.
Moreover, the carpet area of the residential unit shouldn’t exceed 60 square meter in metropolitan cities or 90 square meter in cities or towns other than Bengaluru, Chennai, Delhi NCR (i.e. Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon and Faridabad), Mumbai (whole of Mumbai Metropolitan Region), Hyderabad and Kolkata.
On fulfilling the above conditions, the buyer of an affordable house may claim deductions up to Rs 3.5 lakh by combining the benefits u/s 24 (Rs 2 lakh) and 80EEA (Rs 1.5 lakh), in case total interest paid on home loan in the financial year is Rs 3.5 lakh or more.
Now by taking an example, let’s see up to how much tax may be saved by purchasing an electric vehicle and an affordable house on loan.
For example, Sujit is a salaried employee and stays with in his parents’ house. His gross salary is Rs 13,25,000 and his tax-saving investments are Rs 2 lakh. He has also taken health insurance policy for himself and his family for a premium of Rs 30,000 and also for his senior citizen parents for a premium of Rs 80,000. He also makes voluntary contribution of Rs 50,000 in Tier-I NPS account.
The tax payable by Sujit will be as follows:
So, the tax payable by Sujit on his taxable salary of Rs 10 lakh is Rs 1,17,000, including 4 per cent Health & Education Cess.
Income Tax Calculator: Know post-Budget 2019 Income Tax out go here
Now, Sujit purchases an affordable house and an electric vehicle by taking loan, and interest payable on the first year on home loan is Rs 4,32,000 and on auto loan is Rs 2 lakh.
Now, let’s see how much tax Sujit may save by purchasing the affordable house and the electric vehicle on loan:
So, the additional deduction totaling Rs 5 lakh (i.e. Rs 3.5 lakh on home loan and Rs 1.5 lakh on auto loan) helps Sujit in saving Rs 1,17,000 in tax.