The budget has two proposals which intend to extend the tax benefits available to home buyers.
Extension of time limit for availing home loan interest deduction to buy a house
An individual is entitled to , under Section 80EEA, claim deduction of interest upto Rs. 1.50 lakh for loan taken from financial institutions to buy a residential house property with the stamp duty value upto Rs. 45 lakhs. This deduction is available only if the home loan is sanctioned between 1st April 2019 and 31st March 2021. Since the real estate sector is facing hardships, the government has decided to extend the date beyond 31st March 2021 and now you will be able to avail this benefit for loans sanctioned by 31st March 2022. This benefit is available provided the buyer does not have any other residential house on the date of sanction of the home loan. Though one is entitled to deduction of Section under 24(b) for interest on money borrowed but the benefit under Section 24(b) becomes available after possession of the house or completion of the construction in case the house is self-constructed. In contrast, the deduction under Section 80EEA can be claimed even in respect of interest paid on such home loan even during the construction period. Though one is entitled to amortise the interest paid during the construction but looking at the restriction of Rs. two lakhs for self-occupied property and restriction of two lakhs of loss against other income during the year and the fact that the amount of home loan nowadays required to be taken for buying property in big cities is very huge , home buyers are hardly able to claim the amortised portion of interest effectively. It may be noted that deduction under Section 80EEA and 24(b) can be claimed simultaneously but not for the same amount. So this is a welcome proposal.
Rationalisation of provision for taxation of difference between stamp duty value and agreement value
If a person sells any immovable property below the stamp duty valuation, the difference is taxed in his hands. Moreover, at the same time the buyer is also taxed for such difference. In order to provide the relief to cases of marginal difference, the government had provided for a tolerance limit of 5% between these two values in 2013 and increased to 10% in the last budget. Since the real estate sector is in doldrums and the prices have corrected significantly during this pandemic developers are finding it difficult to sell their houses at the stamp duty valuation, the government has proposed to increase the tolerance limit to 20%. The transactions which will qualify for this higher tolerance limit are those where the agreement value of the property does not exceed Rs. two crores and the property is question is residential property being bought from the developer directly as first allotment during the period 12th November 2020 and 31st March 2021.
Likewise, in order to provide simultaneous relief to the buyer of such units the budget proposes to enhance the tolerance limit to 20% for the property of the above nature.
I am unable to understand the reason for providing for higher tolerance limit only for the developer and that too for transactions entered during the specified period for upto Rs. two crores. Has the correction only impacted the residential property owned by the developer and not the genuine home owners? Or does the government implicitly wishes that the black money component in respect of property transaction with developers goes up by providing such selective relaxation of tolerance limits between agreement value and stamp duty valuations for developer only. The benefit of higher tolerance limits should have been extended to all the property transactions irrespective of the value and not only for the sale of residential by developer upto Rs. two crores. This is more important given the fact that in most of the cases the stamp duty valuations have not been revised during the current year whereas the prices have, in fact, corrected during the same period.
The writer is tax and investment expert and can be reached on jainbalwant@gmail.com
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Dear Sir,
In an instant case Sale Consideration of Flat is 52 Lacs, Stamp Duty Value is 45 Lacs. Stamp Duty Assessable Value is 52 Lacs (Higher of Sale Consideration or Stamp Duty Value). Loan Sanctioned between April 19 to March 22. Can deduction under Section 80EEA be taken in this case as the Stamp Duty Assessable Value is exceeding 45 Lacs but Stamp Duty Value by itself is not exceeding 45 Lacs.