New FY gift! First time home buyers to get additional tax benefit of Rs 50,000 from today

New Delhi: First time home buyers will get additional tax benefit for purchase of residential properties of value up to Rs 50 lakh from Friday.

The government's proposal coming into force from today is aimed at promoting its 'housing for all' scheme and bolster the real estate sector which is facing a huge slowdown for last three-four years.

The Finance Bill 2016, which is likely to be approved by Parliament during the second half of the Budget session, provides for up to Rs 50,000 tax benefit on loan up to Rs 35 lakh taken for residential house.

"In furtherance of the goal of the Government of providing 'housing for all', it is proposed to incentivise first-home buyers availing home loans, by providing additional deduction in respect of interest on loan taken for residential house property from any financial institution up to Rs 50,000," said the Bill, presented to Parliament by Finance Minister Arun Jaitley.

This incentive is proposed to be extended to a house property of a value less than Rs 50 lakh in respect of which a loan of an amount not exceeding Rs 35 lakh has been sanctioned during the period from the April 1, 2016 to March 31, 2017.

"It is also proposed to extend the benefit of deduction till the repayment of loan continues," the Bill said.

The proposed deduction is over and above the limit of Rs 2 lakh provided for a self-occupied property under section 24 of the Act.

Realtors' apex body CREDAI Getamber Anand said the tax incentive will encourage first-time home buyers and increase the demand significantly.

After the Finance Bill is passed by Parliament, the amendments in this regard in the Income Tax Act will take effect from April 1, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years.

With a view to incentivise affordable housing sector as a part of larger objective of 'Housing for All', the Bill also propose to amend the Act so as to provide for 100 per cent deduction of the profits of an assessee developing and building affordable housing projects if the project is approved before the March 31, 2019.