The Union Budget 2023 is a key event in the financial planning of an individual as it impacts their key expenses and cash flow which would dictate their spending power as well as the consumable income available to them. Unlike business owners, who can claim various expenses, spent for business, salaried individuals have very few expenses that they can claim against their taxable income which helps them reduce their tax burden.

One of the key aspects of an individual’s financial planning is often the EMI of their home loan. The interest on such EMI and the principal repayment is available as a deduction to the individual against their income. This allows them to reduce their tax burden and this increases their consumable income.

Key Highlights for Home Loan Borrowers

The budget saw various changes for loan borrowers. However, they were limited to the new income tax regime which does not allow for any deductions. The deductions under repayment of housing loan or interest thereon are not available for individuals who have taken a home loan and are repaying the same.

Hence, from the perspective of home loans, the budget maintains the status quo for salaried individuals and tax or tax savings thereon.

Current Tax Deductions for Home Loans for a Salaried Individual

At present, the interest on the home loan can be claimed as a deduction up to INR 2,00,000 by an individual under Income from House Property, which can be then set off against their income from salary.

Apart from the above, deductions under section 80EE are also available but not for new loans. The individual can also claim repayment of the principal of the housing loan as a deduction under Section 80C of the Income Tax Act, subject to a limit of INR 1,50,000 including all other deductions available under 80C. Thus, currently, an individual can avail of a maximum of INR 3,50,000 as a deduction against home loan repayment under the old tax regime.

Must Read: 80EE vs 80EEA: Know The Difference Between For A Home Loan

What Does the Union Budget Mean?

The Union Budget, which is released by the finance ministry every year, explains the key focus areas of the central government of India with respect to expenditure. The budget also explains how the central government plans to earn its revenue through taxation as well as non-taxation methods.

From the perspective of home loans, the budget has brought no changes to an individual tax-payer for whom the available deductions are the same as in previous years with neither an increment nor a decline in any available deduction.

From the perspective of tax-payers under the old tax regime, they will see an increase in their overall income and consumable income which will increase their overall ability to acquire a housing loan to buy a new house for their family. An increased total income in the IT return and an increased consumable income after tax may result in a probability of a lower rate of interest on their loans due to the comfortable margins available to financial institutions.

The government has seen housing as one of its key components and has even increased the overall budget for the PM Awas Yojana scheme. This should see an increase in housing projects and allow individuals to fulfill their dream of buying their own house with the help of financial institutions to avail of their housing loans.

If you wish to take up a home loan at affordable interest rates through with flexible tenures, then you must turn to SMFG Grihashakti. Check your EMI obligations through our home loan calculator and apply now!