Tax and Interest Subsidy Benefit on Home Loan

This article will cover details regarding Pradhan Mantri Awas Yojana (PMAY). Further, also cover subsidy rate, maximum loan amount and other details regarding this scheme such as how to avail loan under this scheme and how this scheme works, income tax benefits for home loan.

Are you looking for a home loan? If yes, then this is the right time to apply for the same. If your annual income is up to INR 18 lakh, you are now eligible for interest subsidy on home loans under the Pradhan Mantri Awas Yojana (PMAY). The interest subsidy is allowed under the new Credit Linked Subsidy Scheme (CLSS) by Ministry of Housing and Urban Poverty Alleviation.

Individuals already being sanctioned a home loan since January 1 this year would also qualify for the interest subsidy. Most of the premier finance companies in India such as Indiabulls Home Loans have all geared up and are offering affordable home loans helping you to fulfil your dream of owning your own home.

As per M. Venkaiah Naidu, Minister of Housing and Urban Poverty Alleviation, incentivization of affordable housing at large scale would boost the real estate sector that would consequently result in employment opportunities as well.

A. Key Parameters of Credit Linked Subsidy Scheme under Pradhan Mantri Awas Yojana (PMAY)

As per the latest update upto January, 2020, the details such as subsidy rate, maximum loan amount and other details have been given as under:

i. For Economically Weaker Section (EWS):

Economically Weaker Section (EWS) means the applicant whose maximum annual income will be upto Rs 3 lakhs. For these kinds of people the interest subsidy given will be 6.5% subject to following conditions:

a) Maximum Home Loan Amount should be Rs 6 lakhs

b) Maximum Carpet Area should be 30 Sq. Mtr.

ii. For Low Income Group (LIG):

Low Income Group (LIG) means the applicant whose maximum annual income will be upto Rs 3 to 6 lakhs. For these kinds of people the interest subsidy given will be 6.5% subject to following conditions:

a) Maximum Home Loan Amount should be Rs 6 lakhs

b) Maximum Carpet Area should be 60 Sq. Mtr.

iii. For Medium Income Group (MIG):

Medium Income Group (MIG) – Level 1

Medium Income Group (MIG) – Level 1 means the applicant whose maximum annual income will be upto Rs 6 to 12 lakhs. For these kinds of people the interest subsidy given will be 4% subject to following conditions:

a) Maximum Home Loan Amount should be Rs 9 lakhs

b) Maximum Carpet Area should be 160 Sq. Mtr.

Medium Income Group (MIG) – Level 2

Medium Income Group (MIG) – Level 2 means the applicant whose maximum annual income will be upto Rs 12 to 18 lakhs. For these kinds of people the interest subsidy given will be 3% subject to following conditions:

a) Maximum Home Loan Amount should be Rs 12 lakhs

b) Maximum Carpet Area should be 200 Sq. Mtr.

B. Salient features of CLSS under Pradhan Mantri Awas Yojana (PMAY):

1. The interest subsidy will be available for maximum loan tenure of 20 years or the loan tenure whichever is lower.

2. The interest subsidy will be calculated at 9% NPV over a maximum loan tenure of 20 years or the actual tenure

3. Credit linked subsidy would be available for housing loans availed for new construction and addition of rooms, kitchen, toilet etc. to existing dwellings as incremental housing.

4. One of the owners of the property must be a woman.

C. How to avail loan under Pradhan Mantri Awas Yojana (PMAY)?

You could avail PMAY linked loans from primary lending institutions like housing finance companies, scheduled commercial banks, Regional Rural Banks, Urban Cooperative Banks, State Cooperative Banks, Non-Banking Financial Company, Small Finance Banks etc. There wouldn’t be processing charge for such housing loans according to the income criteria under the said scheme. For any additional loan amounts in excess of the eligible loan for the purpose of interest subsidy lenders could be charged a normal processing fee.

D. How CLSS scheme works under Pradhan Mantri Awas Yojana (PMAY)?

HUDCO (Housing and Urban Development Corporation) and NHB (National Housing Board) are the Central Nodal Agencies for the implementation of CLSS (Credit Linked Subsidy Scheme). These agencies will then reimburse the subsidy of interest to the PLIs (Primary Lending Institutions) depending on the loans which have been advanced to the beneficiaries by PLIs. The PLIs include Housing Finance Companies, Scheduled Commercial Banks, State and Urban Cooperative Banks, Small Housing Banks, NBFC-MFI and Regional Rural Banks.

Beneficiaries eligible for interest subsidy under CLSS can directly apply to the lending institutions. After verification of applications, the lenders will sanction loans and then claim the subsidy from the nodal agencies. If you are looking for a home loan, ensure you check home loan tax benefit calculator with Indiabulls Home Loans to get a good idea about the tax benefit which you could avail.

E. Income Tax Benefit on Home Loan

Home loan is considered as a great tax savings tool. The interest paid on a housing loan with respect to a self-occupied or a rented house is allowed to be adjusted with the income of an assessed subject to a limit of INR 2 lakhs. This will reduce the tax liability of an individual to a large extent. Most of the taxpayers believe house as the best means of investment for the purposes of tax planning with a long-term view.

(Republished with Amendments)