The presentation of the Union Budget on February 1, 2023, by Finance Minister Nirmala Sitharaman has sparked interest among homebuyers due to its potential impact on current housing loan interest rates and repayment. Home Loans play a vital role in the economy, and the real estate sector’s growth depends on the demand for homes.
Homebuyers had proposed several suggestions to the Finance Minister, such as favourable Home Loan policies, reduced stamp duty and registration charges, and reintroducing subvention schemes.
This blog will examine whether these expectations were met in the recent Budget and how the financial year will unfold for homebuyers. The Budget focuses on infrastructure, green development, and connectivity to stimulate growth in the real estate sector.
Overview of the Budget 2023
The Budget 2023, presented by the Finance Minister, Nirmala Sitharaman, focuses on seven main priorities: Green Growth, Youth Power, Financial Sector, Inclusive Development,
Reaching the Last Mile, Infrastructure and Investment, and Unleashing the Potential.
The Capital Expenditure outlay has increased by 33%, while the effective CapEx is 4.5% of GDP. The Budget aims to keep the fiscal deficit at 5.9%, and an infusion of INR 9,000 crore for MSMEs with an additional INR 2 lakh crore credit guarantee for MSMEs has been proposed. The new tax regime increases the rebate limit to INR 7 lakh, with five tax slabs and a tax exemption limit of INR 3 lakh.
The Budget also impacts indirect taxes, such as an excise duty exemption on GST-paid compressed biogas and increased import duties for gold, platinum, and silver. The Budget also includes measures for Senior Citizens and Youth, such as revising the deposit limits for savings schemes and introducing a National Apprenticeship Promotion Scheme.
The Budget focuses on an inclusive and empowered economy, with measures to promote financial inclusion, infrastructure, and skill development.
Impacts on Home Loan Interest Rates
Reducing your tax liability is possible through various income tax deductions available to taxpayers. One such avenue is a current Home Loan interest rate deduction under the old income tax regime. Section 80C of the Income Tax Act, 1961 allows taxpayers to claim a deduction on the principal component of their equated monthly instalments (EMIs), while Section 24b of the Act allows for a deduction of up to Rs 2 lakh on the interest portion of a self-occupied property.
Additionally, taxpayers may be eligible for further deductions on interest payment for their existing Home Loan under Sections 80EE and 80EEA, up to Rs 50,000 and Rs 1.5 lakh per annum, depending on their eligibility. You can easily calculate how it can affect your Home Loan EMI with an EMI calculator for LAP.
Impacts on Home Loan Repayment
The current income tax regime allows taxpayers to claim deductions on Home Loans, thereby reducing their tax liability. Under Section 80C of the Income Tax Act, 1961, the principal component of the equated monthly instalments (EMIs) is eligible for the deduction. Section 24b further determines up to Rs 2 lakh for interest payment on a self-occupied property.
Additionally, taxpayers may be eligible for extra deductions under Section 80EE and Section 80 EEA, up to Rs 50,000 and up to Rs 1.5 lakh per annum, respectively, for interest payments on existing Home Loans, subject to certain conditions.
The total deduction for interest repayment on housing loans can amount to Rs 3.5 lakh (Rs 2 lakh under Section 24 and Rs 1.5 lakh under the new Section 80 EEA), provided that the Home Loan was taken by a first-time homebuyer between April 1, 2019, and March 31, 2020.
However, the Finance Bill 2023 proposes new rules that may increase your tax liability from capital gains when selling the property if you have claimed these deductions. Therefore, it is essential to evaluate the benefits and keep these rules in mind before claiming deductions against Home Loans in the future.
Conclusion
The Union Budget 2023 presented has focused on stimulating growth in the real estate sector by prioritising infrastructure, green development, and connectivity. While the Budget has proposed measures for financial inclusion, skill development, and MSMEs, it may impact Home Loan interest rates and repayment for taxpayers.
Taxpayers can still claim deductions on home loan online under the old and new income tax regimes, subject to certain conditions. However, the Budget 2023 proposes new rules that may increase tax liability arising out of capital gains, highlighting the need for homebuyers to evaluate the benefits before claiming deductions against Home Loans in the future. Additionally, you can check your Home Loan EMI with current rates and norms with an EMI calculator for LAP.
