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Advantages to First-Time Home Buyers in India

Advantages to First-Time Home Buyers in India

Everyone’s idea of a dream home may be different, but what’s common to every Indian is the wish to own a house of their own. For many, it is more than just an asset; it is a source of pride, affection, security, and stability. This feeling is further strengthened when it is your first house. To assist a first-time home buyer, the government has taken several steps in the form of tax deductions, subsidies, and schemes to encourage their buying and support them with housing finance. Let us explore some of these initiatives that could also benefit your home buying:

Section 80C

Up to Rs. 1.5 lakh can be claimed in tax benefits on the repayment of the principal amount of a home loan. This deduction is valid only on properties for which the construction is complete, and are kept for at least 5 years since the date of purchase.

Section 80EE & 80EEA

Additionally, these buyers can avail a tax benefit of Rs. 50,000 on interest repayment which is over and above the tax benefits offered under Section 24. In the union budget of 2019, a new section was introduced – section 80EEA. This section extends the tax benefits on interest repayment up to Rs. 1.5 lakhs for a home loan under ‘affordable housing’. This can be leveraged only if you are not entitled to benefits from Section 80EE.

Additional Read: What are the Home Loan Tax Benefits under Section 80EE & 80EEA?

Section 24

First-time home buyers paying interest on home loan could also claim deductions on interest paid up to a maximum of Rs. 2 lakhs per annum. This is applicable only if the property is self-occupied and not rented.

Claim Period

Before 2016, the tax benefits could be claimed only on self-occupied properties whose construction or acquisition takes place within 3 years from the date the loan was sanctioned. This has been relaxed to 5 years since the budget of 2016 following the trends of real estate in India.

Real Estate Regulation Act (RERA) – 2016

RERA helps homebuyers in many ways: data transparency on projects from builders, standardized measures for a property (like carpet area), rights of the buyers defined and strengthened, regulations on insolvency, etc. It keeps the malpractices of the builders in check and regulates the sector to increase the stakes of the buyer.

Additional Read: How to Find Out If Your Home Builder is RERA Registered?

Pradhan Mantri Awas Yojana (PMAY)

The government’s mission to provide ‘housing for all’ was realized in 2015 with the complete implementation of PMAY. It gives subsidy for first-time home-buyers from lower and middle-income groups (the maximum family income to be Rs. 18 lakh). Depending upon the income, the subsidy rates on the principle amount vary.

Eligible individuals can avail the following tax concessions under PMAY:

Income groupLoan grant limitIncome eligibilitySubsidy on interest
EWSUp to Rs. 6 lakhsAnnual income less than Rs. 3 lakhs6.5% on interest
LIGUp to Rs. 9 lakhsAnnual income under Rs. 6 lakhs4% on interest
MIGUp to Rs. 12 lakhsAnnual income below Rs. 12 lakhs3% on interest

GST on Housing Subsidy

A GST of 12% was applicable on houses purchased under PMAY. This was further slashed to 8% in 2018. This implies, a first-time homebuyer with a family income of Rs. 18 lakhs will be eligible for a benefit of up to Rs. 2.7 lakhs while buying an apartment or a house, instead of the earlier Rs. 2.5 lakhs.

New Income Slabs for Subsidy

Two new income slab have been introduced for the housing loan subsidy under PMAY. Buyers with an income of Rs. 12 lakhs per annum are given 4% subsidy on a principal amount of Rs. 9 lakhs. The other is a 3% subsidy on a principal amount of Rs. 12 lakhs for individuals earning Rs.18 lakhs per annum.

Additional Read: Planning To Buy a Home for the First Time? Make Sure to Follow this Home loan Buying Guide

With changing economic trends, the real estate sector and buying trends of individuals have changed tremendously. However, buying a house, especially the first house, is still valuable to every Indian. By making use of these government initiatives, one can capitalize on the advantages of buying a home in India.

Tata Capital’s offer flexible home loan eligibility criteria, attractive interest rates, and easy documentation for its customers. With home loan interest rates as low as 9.25%, visit your nearest Tata Capital branch today for your dream home!

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FAQs

How can a first-time home buyer save money?

First-time buyers can save by choosing affordable properties, availing of government subsidies like PMAY, negotiating with lenders for better rates, and claiming tax benefits on home loan interest and principal repayment.

Is stamp duty free for first-time buyers?

Stamp duty is not entirely free for first-time buyers. But you claim it later under section 80C of the ITA while filing your annual income tax returns.

What is the additional tax exemption for first-time homebuyers?

First-time homebuyers can enjoy additional tax benefits up to Rs. 1.5 lakhs under section 80 EEA for affordable housing, above the usual deduction of Rs. 2 lakhs under section 24.

What is the subsidy for first time home buyers in India?

Under the Pradhan Mantri Awas Yojana (PMAY), first-time buyers can get a subsidy of up to 6.5% on interest, depending on their income category and loan amount.
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