These were the home loan tax benefits that were announced during Budget 2016

Planning a budget for 2017 and thinking of buying your dream house? If yes, you should definitely not overlook some of the tax benefits that were introduced in Budget 2016. Home loan borrowers can get additional benefits, if they qualify. Also, if you haven’t received House Rent Allowance (HRA), you should also check as to whether you can claim the increased tax break given to them in Budget 2016.

Under Section 80EE of the Income Tax Act, 1961, first-home buyers availing home loans in 2016-17 are allowed to take additional tax benefit of up to Rs 50,000. So, a home loan borrower paying interest on the loan can claim deduction of interest so paid from his/her gross total income up to a maximum of Rs 2 lakh per annum under Section 24. However, there are some conditions attached to it and they are:

The additional deduction with respect to interest on loan taken will be applicable only for residential self occupied house property.

It's only for first-time home buyers.

The maximum additional benefit is capped at Rs 50,000 a year.

The value of the house for which loan is taken cannot exceed Rs 50 lakh.

The loan amount cannot exceed Rs 35 lakh.

The loan has to be sanctioned between April 1, 2016 and March 31, 2017.

Illustratively, on a home loan of Rs 35 lakh at 9.6/8.6 per cent interest for 15 years, the first year interest amount comes to approximately Rs 3.3 lakh and Rs 2.96 lakh, respectively.

Other thing that one can look for is the increase in time period for claiming deduction of interest. In a home loan, the interest payable up to Rs 2 lakh gets deducted from gross total income while computing income from self-occupied house property. However, it is only applicable in cases where the acquisition or construction of the house is completed within three years from the end of the financial year in which the loan was taken.

In Budget 2016, there was a relaxation in the time period and the tax benefit would hold even if the acquisition or construction is completed within five years from the end of the financial year in which the capital was borrowed.

All those getting house possession this year, this extension gives a relief. With builders not completing projects on time and delivery of homes getting delayed, this change in tax rules will benefit several home loan borrowers and they will not suffer (due to inability to avail tax benefit) because of builder's default in handling over the homes in time.

One can also look for benefit, if they aren’t getting HRA. Section 80GG provides for a deduction of any expenditure incurred by an individual in excess of 10 per cent of his total income towards rent payment with respect to any furnished or unfurnished accommodation occupied by him as his residence if he is not granted HRA by his employer, to the extent that such excess expenditure does not exceed Rs 2,000 per month or 25 per cent of his total income for the year, whichever is less.

In Budget 2016, relief was provided to such employees. The maximum limit of deduction was increased from the existing Rs 2,000 per month to Rs 5,000 per month.