Home buyers lose 85% of tax benefit on delayed possession

 Did you know that a tax deduction of Rs 2 lakh annually is permissible against payment of interest on home loans, if the house is acquired within three years of taking the loan? and, if the possession takes place after three years, the exemption reduces to a mere Rs 30,000 a year — a drop of 85% – that’s like rubbing salt to an injury of delayed possession with absolutely no fault of yours!

Considering the ongoing turmoil in the real estate sector, most builders are committing delivery after four years of booking, so home buyers lose out on a big chunk of the potential tax deduction. Partner and national head of KPMG, Vikas Vasal, said the three-year possession condition was introduced to expedite construction of projects, but it did not pay off due to the market slump.

For people with annual taxable income of Rs 5 lakh or more falling in the top income tax bracket of 30%, the benefit resulting from this proviso drops from Rs 60,000 to Rs 9,000 per year. For instance, on a home loan of Rs 50 lakh taken at 9% interest for 20 years, the total loss through the entire repayment period will be Rs 8.81 lakh.