CCI Online Learning
50% OFF in CA/CS/CMA Subjects
     
CIBIL

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Is the COVID-19 period, a right time to buy your dream house?

CS Shivam Singhal 
on 17 October 2020

LinkedIn


The COVID-19 pandemic has dipped the Indian economy to a large extend. Sectors like Tourism, Banking, Real Estate are in danger zone. However, the Government and RBI have come out with various options for homebuyers, in order to boost the Real Estate and Banking Sector like:

  • Reduction in CRR and SLR, which has caused to reduce the bank loan interest rate; and
  • Extension in the Pradhan Mantri Awas Yojana (PMAY) for MIG-I and II categories peoples.

Now, the Homebuyers have four reasons to buy their dream home:

Image

1. HOME LOAN RELIEF: Without talking too much, let's try to understand with the following examples:

HDFC Bank

Interest @ 8.05%
(before lockdown)

Current interest @ 6.95%
(due to Covid)

Loan amount

Rs. 25 Lakhs

Rs. 25 Lakhs

Duration

20 Years

20 Years

Monthly EMI

Rs. 20,987

Rs. 19,308

Total savings in monthly EMI: Rs. 1,679/-

Total savings in EMI (yearly): Rs. 1,679 * 12 = Rs. 20,148/-

Is the COVID-19 period, a right time to buy your dream house

State Bank of India

Interest @ 7.95%
(before lockdown)

Current interest @ 6.95%
(due to Covid)

Loan amount

Rs. 25 Lakhs

Rs. 25 Lakhs

Duration

20 Years

20 Years

Monthly EMI

Rs. 20,833

Rs. 19,308

Total saving in monthly EMI: Rs. 1,525/-

Total savings in EMI (yearly): Rs. 1,525 * 12 = Rs. 18,300/-

 

Note: Interest rate has taken out from the respective bank website.

2. PMAY RELIEF: “Housing for All” Mission to provide central assistance in the form of interest subsidy on housing loans for acquisition/ construction of houses for Economically Weaker Section (EWS), Lower Income Group (LIG), and Middle Income Group (MIG). Previously, the last date for MIG Category was 31st March 2020. Now, the Government has extended the scheme for MIG Category up to 31st March 2021. MIG Category is divided into two categories i.e. MIG-I and MIG-II Category.

The key parameters for each category are as follows:

Particulars

EWS

LIG

MIG-I

MIG-II

Family Income

Rs. 0 to Rs. 3,00,000

Rs. 3,00,001 to Rs. 6,00,000

Rs. 6,00,001 to Rs. 12,00,000

Rs. 12,00,001 to Rs. 18,00,000

Max Carpet Area (sq. m.)

30

60

160

200

Max Subsidy

Rs. 2.67 lakh

Rs. 2.67 lakh

Rs. 2.35 lakh

Rs. 2.30 lakh

 

EXAMPLE: The borrower avails a loan for Rs. 25 Lakhs and the subsidy works out to Rs. 2,35,000. The amount (Rs. 2,35,000) would be reduced upfront from the loan (i.e., the loan would reduce to Rs. 22,65,000) and the borrower would pay EMIs on the reduced amount of Rs. 22,65,000.

However, the following things must be taken in mind before applying for PMAY:

  1. The beneficiary family should not own a pucca house either in his/her name or in the name of any member of his/her family in any part of India.
  2. The beneficiary family should not have availed of central assistance under any housing scheme from the Government of India or any benefit under any scheme in PMAY.
  3. The beneficiary family will comprise of a husband, wife, unmarried sons, and unmarried daughters. However, an adult earning member and a married son or married daughter shall be treated as a separate household.

3. GST RATES: On the GST aspect, let's try to understand the GST rates with the following table:

Property Type

GST rate till March 2019

GST rate from April 2019

Affordable housing*

8% with ITC

1% without ITC

Non-affordable housing

12% with ITC

5% without ITC

*Definition of affordable housing: Only those flats with a carpet area of 60 sq. m. in metros cities (i.e. Delhi-NCR, Bengaluru, Chennai, Hyderabad, Mumbai, and Kolkata) and 90 sq. m. in non-metros cities falling under the Rs. 45 lakh cap is affordable housing.

4. INCOME TAX ASPECTS: Interest payable on loans borrowed for the purpose of acquisition or construction of housing property can be claimed as deduction under section 24(b) of the Income Tax Act, 1961. However, the total interest deduction cannot be more than Rs. 2 lakhs.

Interest in pre-construction period: Interest payable on the loan for the period prior to the previous year in which the property has been acquired or constructed (pre-construction period) can be claimed as deduction over a period of 5 years in equal installments commencing from the year of acquisition or completion of construction.

Note: ‘Pre-construction period' is the period prior to the previous year in which property is acquired or construction is completed.

Interest for the year in which construction is completed/ property acquired: Interest relating to the year of completion of construction/ acquisition of property can be fully claimed in that year irrespective of the date of completion/ acquisition.

For Example: Assume interest @ 7%.

Conditions

  1.  

Loan sanctioned

2020-21

Loan: Rs. 25 lakhs

  1.  

Completion of construction

2022-23

Interest for FY 2022-23:

= Rs. 1,64,206

  1.  

Pre-construction period

2 years (2020-21 & 2021-22)

Total interest:

Rs. 1,73,116 (2020-21)

+

Rs. 1,68,817 (2021-22)

= Rs. 3,41,933

Eligible deduction u/s 24(b)

  1.  

Eligible deduction of interest in FY 2020-21

Not eligible

Nil

  1.  

Eligible deduction of interest in FY 2021-22

Not eligible

Nil

  1.  

Eligible deduction of interest in FY 2022-23

One-fifth of interest paid for the pre-construction period

+

Interest payable in FY 2022-23

(Maximum deduction: Rs. 2 lakhs)

68,387 [one-fifth of the amount referred in point (c)]

+

1,64,206 [total amount refer in point (b)]

= Rs. 2,32,593

So, the eligible deduction for FY 2022-23:

= Rs. 2,00,000/-


Tags :



Category Others
Other Articles by -
CS Shivam Singhal 

Report Abuse

LinkedIn



Comments



Popular Articles



CCI Articles

submit article

Stay updated with latest Articles!





GST Live Class    |    x