Home Loan for Women

In the continuously feminising world, women are moving closer and closer to gain complete financial independence. The biggest step towards attaining the financial stronghold is house ownership. In order to encourage and empower women to buy their own homes, government and banks provide various benefits to female home buyers. While the government offers a concession on stamp duty, the banks proffer lower interests and longer tenures to women home loan borrowers.

Home Loan Benefits for Women

Alongside a reduction of 1% – 2% on stamp duty and registration charges, women home buyers enjoy additional benefits when they choose to go for a home loan for fulfilling their housing requirements:

Higher Loan Amount

Banks usually sanction a higher loan amount to female borrowers as compared to what is sanctioned to male borrowers. This is due to the fact that banks consider women to be more sincere towards debt repayments. Banks like SBI can even sanction a home loan of up to Rs. 3.5 Crores to a female applicant.

Lower Interest Rate

Banks offer a concession of about 0.05% – 0.10% on interest rates for home loans offered to women. Although this percentage may appear to be nothing yet they can lead to saving lakhs of money paid away as interest over the entire loan tenure. Here we have compared the interest rates offered to women and men by a few banks.

Bank/FIWomenMen
SBI8.75% – 9.85%8.80% – 9.90%
HDFC Bank8.90% – 10.10%8.95% – 10.15%
Axis Bank8.90% – 12.45%8.95% – 12.50%
ICICI Bank9.05% – 9.25%9.10% – 9.30%
PNB8.70% – 9.25%8.75% – 9.30%
Bajaj Finserv9.05% – 11.10%9.10% – 11.15%
Citibank8.75% – 10.70%8.80% – 10.75%

Longer Tenure

Pertaining to the sincerity in debt repayment of female borrowers, banks are more willing to sanction loans for a longer tenure. Some banks even agree to sanction a home loan extending for 30 years to women borrowers.

Add-on Offers

In order to encourage women home buyers, banks give a warm welcome to female applicants by giving out gift vouchers, gold coins, free vacation offers and privileged credit cards to the borrowers.

Tax Benefits

Women home loan borrowers enjoy income tax benefits at par with males under the various provisions of the income tax act. Women are eligible to enjoy annual tax deduction of up to Rs. 2 Lacs on interest payment under section 24, Rs. 1.5 Lacs under section 80C on principal repayment and the recently introduced additional tax benefit of up to Rs. 1.5 Lacs under section 80EEA on interest repayments exceeding the Rs. 2 Lacs mark.

Home Loan Eligibility for Women

A woman can apply and avail a home loan if she satisfies the following conditions:

Indian Resident

In order to enjoy the various benefits available for female borrowers, a woman home buyer must necessarily be a resident of India. NRI women availing home loans in India do not qualify for these benefits.

At least 18 Years Old

For successfully receiving a home loan, a female applicant must be at least 18 years old at the time of availing the loan.

First Owner of Property

The woman should be the sole owner of the house for which the loan is to be availed, in case of single ownership. In case of joint ownership of the house, she should be the first co-owner of the property, that is, she should hold not less than 50% of the house ownership. Similarly, she should be the first co-borrower, in case the loan is availed jointly by all the co-owners.

Regular Income

In order to ensure the bank that the woman will be able to repay the debt, the woman borrower must have a stable source of income. The income inflows must be regular and viscous.

Good Credit Score

Credit score is a major deciding factor when it comes to borrowing and women are no exceptions. In order to enjoy lower interest rate and a bigger loan amount, a female borrower must ensure that she has a good credit score and clean debt history.

Things a Women Must Take Into Consideration While Taking a Home Loan

There are certain things that a woman must keep in mind before proceeding further with her loan application. These are:

Banks Resist Lending to Single Women

Banks usually do not provide home loans to single female applicant and require a co-applicant for sanctioning the loan. Therefore, women may not be able to enjoy these benefits on their own. Also, banks may ask for some additional security from a single woman.

Check Different Offers

Since banks come up with new schemes from time-to-time, targeted towards female borrowers, a woman must check various bank offers and go with the best one. For instance, SBI came up with a scheme, “SBI Her Ghar” designed specifically for women home buyers that provided for very less interest rates and flexible repayment options.

Takeaway

In order to promote women empowerment, banks offer various benefits to women borrowing home loans. These include lower interest rate, longer tenure, additional gifts and vouchers. There is however one condition for enjoying these benefits that a woman must be the primary home owner. The women also enjoy tax benefits on home loans, similar to men. However, certain banks resist from lending to single women and in such cases, a woman would need a co-applicant for availing the loan and enjoying the respective benefits.

Pradhan Mantri Awas Yojana

Pradhan Mantri Awas Yojana is a financial aid for home loan borrowers, initiated by the central government to provide pucca house for beneficiaries under EWS (Economically Weaker Section), LIG (Lower Income Group) and MIG (Middle Income Group) categories in urban and rural areas of the country with the help of State/UT governments.

The mission is divided into two parts, PMAY – Urban for Urban cities and PMAY – Gramin for rural cities in India. The government is aiming to build 2.95 crore houses over the 7 years period starting from July 2015. Under this mission, government is offering subsidised interest rate ranging from 3% to 6.5% to the eligible beneficiaries to build or construct a new house.

PMAY – Urban

Under PMAY Urban, the government with the help of competent local housing authorities registered with central/state government in urban cities to provide financial help to any eligible local residents who is looking to purchase/construct his/her first pucca house with the help of a housing loan and earning an annual income of under a certain threshold. The government has targeted to construct upto 35% houses in the locality under this scheme, effective from 2015 to 2022.

Under the scheme, the government is aiming to build houses ranging between carpet area of 30 square meters to 150 square meters. However, States are flexible to determine the area of EWS house as per the local needs with information to the Central Ministry running the scheme.

The programme is designed to solve the housing needs of a local resident living in an urban city, and specifically targeting the following goals –

  • Slum rehabilitation of Slum Dwellers with participation of private developers using land as a resource.
  • To promote affordable housing for people who comes under weaker income section through credit linked subsidy.
  • To provide affordable housing in partnership with Public & Private sectors’ local authorities.
  • To provide subsidy to eligible individuals for construction of the house.

A Beneficiary will be eligible for availing only a single benefit under any of the existing options that is slum redevelopment with private partner, credit linked subsidy, direct subsidies to individual beneficiary and affordable housing in partnership.

Feature of PMAY – Urban

Subsidized Interest Rate

Under Pradhan Mantri Awas Yojana Housing for All mission, the central government of India is offering a subsidized interest rate of 6.5% on home loans to the eligible beneficiaries under EWS, LIG or MIG categories, where the home loan tenure is equal to 15 years.

Preference to Senior Citizens/Differently Abled

Under PMAY Housing for All mission, the preference is being offered to senior citizens (above 60 years) and the beneficiaries who are being considered under Differently Abled category for house on the ground floor under the housing projects being built.

Eligibility Criteria for PMAY Urban

  • An eligible family under this scheme will consist of husband, wife and unmarried children, where the family must not own a pucca house (an all weather dwelling unit) in the name of any member of the family at any location in India.
  • The family must be eligible under EWS criteria where the total annual income of the family is not above Rs. 3 Lacs. However, an eligible family can receive some flexibility on the income criteria from State/UT government depending upon the income in the locality as consulted with the Centre.
  • Families eligible under LIG criteria should have an annual income ranging between Rs. 3 Lacs to Rs. 6 Lacs.
  • Families eligible under MIG criteria should have an annual income ranging between Rs. 6 Lacs to Rs. 18 Lacs.
  • The beneficiary can only buy a new house using the benefits provider under the scheme. These benefits can not be availed on already built home.

Interest Rates for PMAY Urban

Beneficiary CategoryInterest SubsidyCarpet AreaIncome
EWS6.5%30 square metersUpto Rs. 3 Lacs
LIG6.5%60 square metersRs. 3 Lacs to Rs. 6 Lacs
MIG-I4%110 square metersRs. 6 Lacs to Rs. 12 Lacs
MIG-II3%150 square metersRs. 12 Lacs to Rs. 18 Lacs

PMAY – Urban Schemes

Credit Linked Subsidy Scheme (CLSS)

Under this scheme, the government is offering home loan subsidy of up to Rs 2.67 Lacs on housing loans by applying for Credit Linked Subsidy Scheme (CLSS) under Pradhan Mantri Awas Yojana in urban areas only, if you’re an eligible beneficiary belonging to the EWS/LIG & MIG segment.

For Economically Weaker Section(EWS)/Lower Income Group(LIG), the interest subsidy will be provided on housing loans for acquisition, construction of house. The Credit Linked subsidy would also be available for housing loans availed for new construction and addition of rooms, kitchen, toilet etc. to existing dwellings as incremental housing.

The offered house is defined as pucca house capable of handling all weather conditions, either a single unit or a unit in multi-storeyed super structure such as multi-storeyed societies. The house for EWS Category will have a carpet area of upto 30 square meters and 60 square meters for LIG Category with basic civic facilities and infrastructure such as toilets, water, and electricity etc. The carpet area is defined as the area enclosed within the walls, actual area to lay the carpet. This area does not include the thickness of the inner walls.

Key Parameters for Credit Linked Subsidy Scheme

CriteriaEWS / LIGMIG-IMIG-II
Maximum Household Income (p.a.)Up to Rs. 6 LacsRs. 6 – Rs. 12 LacsRs. 12 – Rs. 18 Lacs
Maximum Property Area (carpet area)30 sq.m & 60 sq.m110 sq.m150 sq.m
Maximum Loan AmountRs. 6 LacsRs. 9 LacsRs. 12 Lacs
Maximum Tenure15 years15 years15 years
Interest Subsidy (% p.a.)6.50%4%3%
Subsidy AmountRs. 2.67 LacsRs. 2.35 LacsRs. 2.30 Lacs
Women Ownership on PropertyYesNot ApplicableNot Applicable
Beneficiary Family must not own a pucca house in IndiaApplicableApplicableApplicable

How to Apply for Credit Linked Subsidy Scheme (CLSS)

  • Apply for a home loan from a primary lending institution seeking subsidy.
  • If eligible for subsidy, your application will be forwarded to the Central Nodal Agency (CNA).
  • If it’s approved, the CNA will disburse the subsidy amount to the lender.
  • This will be credited to your account, thus reducing the total loan amount.
  • For instance, if your annual income is Rs 7 lakh and the loan amount is Rs 9 lakh, the subsidy will be Rs 2.35 lakh.
  • When this is deducted, the loan is reduced to Rs 6.65 lakh. You will pay EMI on this lowered amount.
  • If the loan amount is higher than the maximum amount eligible for subsidy, the excess will attract interest at the prevalent rate.

Affordable Housing in Partnership (AHP)

Under this scheme, the central government is offering financial assistance of Rs. 1.5 Lacs for each EWS house being built under Pradhan Mantri Awas Yojana with different partnerships by States/UTs/Cities either through their agencies or in partnership with the private sector including industries.

The States/UTs would be the one who will decide the upper ceiling on the sale price of an EWS house in rupees per square meter of carpet area in such projects with an objective to make them affordable and accessible to the intended beneficiaries, where the sale price would be fixed based on the project or the city. To make it more reliable, States and cities may extend other concessions applied by them such as their State subsidy, land at affordable cost, stamp duty exemption etc.

Under affordable housing, a single project will have minimum 250 houses and can consist mix of houses for different categories where 35% houses in the project must be for EWS category.

Beneficiary-led Individual House Construction / Enhancement

Under this scheme, the central government is offering assistance to individual families eligible under EWS categories to either construct new houses or enhance existing houses on their own to cover beneficiaries who are not eligible under any other schemes under Pradhan Mantri Awas Yojana. The beneficiary families can get a subsidy of Rs. 1.5 Lacs for construction of new houses under the mission. If the eligible beneficiary in residing in slums which are not being redeveloped can be covered under this component where the beneficiary must have a Kutcha house.

The beneficiary need to approach ULB (Urban Local Bodies) for the subsidy. State/UT or cities may also contribute financially for such individual house construction. Central assistance will be released to the bank accounts of beneficiaries identified in projects through States/UTs as per recommendations of State/UT. Though the funds from Central Government to State Governments would be released in lump-sum including assistance for this component, State Government should release financial assistance to the beneficiaries in 3-4 instalments depending on progress of construction of the house.

Beneficiary may start the construction using his own funds or any other fund and GoI assistance will be released in proportion to the construction by individual beneficiary. The last instalment of Rs. 30,000 of GoI assistance should be released only after completion of the house.

PMAY – Gramin (Rural)

Under Pradhan Mantri Awas Yojana – Gramin, the Indian government is obligated to build 1 crore houses in rural areas of the country, with the help of competent local housing authorities registered with central/state government in rural cities to fulfill the necessity of home to the local residents. The total cost of the houses being built under this programme is above Rs. 1.3 crores for the session 2018-2019 let alone. The programme is said to be target the availability of 60% of the total funds to SC/ST and 15% of the total funds to Minorities.

Feature of PMAY – Gramin

Construction of 1 Crore Houses

The government is aiming to build 1 crore pucca houses in rural area over a period of 3 years, session of 2016 to 2017, 2017 to 2018 and 2018 to 2019.

Enhanced House Size

Under this scheme, the size of the house is enhanced to 25 square meters including cooking area from 20 square meter in previous gramin housing schemes.

Increased Subsidised Amount

The government is now offering subsidised amount of Rs. 1.2 Lacs in plains as opposed to Rs. 70,000 and Rs. 1.30 Lacs in hilly states, difficult areas and IAP districts as opposed to Rs. 75,000 being offered under previous gramin (rural) housing schemes.

Loan Facility from Banks

Under the scheme, the government also provide the facility to avail loan of upto Rs. 70,000 from banks to build their dream house as per their requirements.

Eligibility Criteria for PMAY Gramin

  • An eligible beneficiary under PMAY – Gramin include all the homeless and family living in kutcha house with zero, one or two rooms.
  • The priority will be assigned to beneficiary families based on the houselessness followed by the number of rooms in the kutcha house, zero, one and two.
  • Beneficiary families should not have any adult member between the age of 16 to 59 years.
  • Beneficiary families headed by female should not have any adult male member between the age of 16 to 59 years.
  • Beneficiary families should not have any literate adult member of above 25 years age.
  • Beneficiary families who have any differently abled member or no able bodied adult member are also eligible.
  • Beneficiary family can be one landless, deriving the major part of their income from manual casual labour.
  • The house must be built by the beneficiary himself/herself or under his/her supervision, without engaging any contractor. In case the beneficiary is old or differently abled person, then the construction of the house will be taken up as a part of mason training program.
  • The construction of the house should be completed within 12 months from the date of sanction of the funds.

Finance

The government is offering Rs. 1.20 Lacs in plain areas and Rs. 1.30 Lacs in hilly states, difficult areas and IAP districts. Where a difficult area is defined as an area where the construction cost is higher due to poor availability of materials, poor connectivity, adverse geo-morphological and climatic conditions. Hilly states includes the states of J&K, Himachal Pradesh and Uttarakhand, whereas IAP districts are defined as the districts taken under integrated action plan of ministry of home affairs. The funds will be disbursed within 3 instalments.

Houses sanctioned under PMAY – Gramin will also be provided Rs. 12,000 additional aid for the construction of toilets from Swachh Bharat Mission or any other dedicated financing source.

Tax Benefits for NRIs on Housing Property

NRIs who file income tax returns in India are eligible to enjoy some of the tax benefits offered by the Government of India under the Income Tax Act of 1961. These include deductions on home loan stated under sections 24, 80C and 80EE of the act. Here we are providing an insight of what these legislations have to offer for the non-resident citizens.

Defining an NRI

NRI is a broad term used collective for Indian citizens who do not reside in India on a regular basis. It means that these citizens are residing outside the country for a considerable part of the year. According to the Income tax Act, 1961 a person is eligible to qualify as an Indian Citizen if he:

  • resides for at least 182 days in India in the current financial year (April 1 to March 31) or
  • Has resided for at least 365 days in the last four years and at least 60 days in the present year in India.

The citizens, who do not satisfy either of the two conditions mentioned above are considered as NRIs.The act does not independently define an NRI. An NRI is defined in The Foreign Exchange Management Act, 1999 (FEMA) as an Indian citizen who is not a resident of India and also, who is a resident in some other country outside of India.

NRIs and Home Loans


An NRI who has been a salaried employee outside India for not less than one year or who has been self-employed for not less than three years is eligible to apply for a home loan in India. The amount sanctioned for the home loan, its tenure and rate of interest will all depend upon a borrower’s customer profile, his salary and age age at the time of maturity of the home loan. Normally, the rate of interest that is offered to NRIs by Indian banks is higher than an interest rate offered to the ordinary residents of the country. Also, the duration for which the loan is sanctioned is also shorter compared to the residents, keeping in mind the fact that the loan paying capacity of NRIs is higher than the ordinary residents.

Benefits up to Rs. 2 Lakhs under Section 24

This section provides for tax deductions that can be claimed on the payment of interest over home loans. The beneficiary can file the claim on the completion of construction. The benefits can provide a tax exemption of 30% and extend up to Rs. 2 lakhs per year. However, the maximum amount of annual deduction gets lowered to Rs. 30,000 in case:

  • The loan was borrowed before April 1, 1999
  • The construction does not get completed within five years from the end of the financial year in which the loan was borrowed.

Benefits up to Rs. 1.5 Lakhs under Section 80C

The section 80C of the Income Tax Act deals with the deduction of taxes available on the repayment of principal amount. Any person including NRIs can avail an annual tax deduction of up to Rs. 1.5 lakhs starting from the year of possession of property provided that she does not sell it for the first five years. If the property is sold within five years, all the benefits that were availed will get reversed and will be charged in the year of selling.

This section further provides for tax deductions on the amount paid as registration charges and stamp duty at the time of buying. The claim for such deductions shall be filed in less than one year of buying the property. However, the total benefits availed under the section shall not cross the cap of Rs. 1.5 lakhs. That means that the deductions on registration charges will be provided only and only if the tax deduction availed on repayment of principal amount is less than Rs. 1.5 lakhs.

Additional Benefits of up to Rs. 50,000 for First Time Buyers

Any citizen who is buying a residential property for the very first time in India is eligible to enjoy an additional tax deduction of up to Rs. 50,000 every year under Section 80EE of the Income Tax Act. These benefits are available for those individuals who have taken a loan between the time period extending from April 1, 2016 to March 31, 2017 and can be enjoyed till the loan is repaid completely.

Benefits up to Rs. 2 Lakhs During the Pre-Construction Phase

The act also provides for a yearly tax deduction of up to Rs. 2 lakhs for interest payments that are made while the house was still under construction. For enjoying these benefits, claims have to be filed in five equal instalments starting from the year of completion of construction and with not more than one claim filed in one year provided the construction is completed within five years from the end of the financial year during which the loan is borrowed. If somehow, the construction is not completed within the stipulated five year period.

No Taxation on Self-Occupied Property

If any property occupied by an NRI is used for family purposes, it is considered as self-occupied and is exempted from taxation. Earlier if an NRI would own more than one self-occupied properties then only one would be considered as self-occupied. All the other houses would be considered as rental property and tax had to be paid on such properties based upon a notional rent. However, the interim budget that was presented in parliament by Finance Minister Piyush Goyal in February 2019 has provided to consider even the second housing property as self-occupied. The notional rent provision would now be imposed from third property onwards.

Less Taxation on Purchase of Property from a Resident

If an NRI purchases a residential property from a resident citizen, he is required to pay taxes at the rate of 1% for properties valued Rs. 50 Lakhs or more. On the other hand, if the property is purchased from a non-resident tax needs to be paid at 20% even if the property is valued less than Rs. 50 lakhs. Thus, an NRI can save taxes by choosing to buy property from the residents.

It is to be noted that all the above benefits can be enjoyed only and only if the NRI person claiming them has filed his tax returns in India. So ensure that you have filed your tax returns in India and enjoy tax benefits at par with the resident tax-payers of the country.

Home Loan Tax Benefits

So as to provide relief to the homeless and to boost construction activity in the country, the government of India has allowed some deductions on home loans under Income tax Act 1961. Under it different set of rules apply depending on the number of houses owned by an owner.

Home Loan Income Tax Benefits Section 80C, 24 and 80EE

In case of Owning a Single House:

Deduction under section 80-C of the Income tax act, on Principal repayment on home loan:

Normal deduction of income of Rs. 1.5 lakhs per year as allowed under Section 80C of the Income tax act, is available on principal repayment made on home loan EMIs paid during the financial year. All the expenses incurred on the process of transferring of the property like stamp duty, registration charges and other expenses related directly to the transfer are also allowed to be added to this principal repayment amount, for the purpose of deduction under Section 80C, of course, subject to a maximum deduction amount of Rs.1.5 lakhs. But the claim on these expenses have to be made in the same year when these expenses have actually been made. However, this deduction is subject to the underlined conditions;

  • The home loan must be for the purchase of a new built up house or for construction of a new house building.
  • There is an underlying condition that such property on which such deduction has been claimed has to be retained for a minimum period of five years from the end of the financial year, in which you purchased the built up house property or completed the construction and took possession of the property. In case you sell such property before completing these mandatory five years, all the deductions claimed earlier shall be reversed and added back to your income of the year in which the property is transferred.

Tax deduction under section 24, of income tax act in India on interest paid on Home loan:

The taxpaying house owner can claim a deduction of up to Rs. 2 lakhs on the interest paid in the financial year, on their home loan interest, in case they own only one house and now after the interim budget of 2019 it has been proposed to be extended to two houses, irrespective of whether one of these or both of these two houses are self occupied or vacant. However, if you have rented out both or any of the two, the entire interest paid on the home loan is allowed as a deduction.

Deduction under section 80EE of Income tax act on interest paid on Home- loan:

An additional deduction of rupees fifty thousand is allowed if you are first-time homeowners. Section 80EE recently added to the Income Tax Act, provides a first-time homeowners tax benefit of up to Rs. 50,000 on the interest paid on home loan. If you are able to satisfy the conditions of both Section 24 and Section 80EE, both the benefits shall apply consecutively to you. First, exhaust your limit under section 24 and then go on to claim the additional benefits under section 80EE. Therefore, this deduction is in addition to the Rs 2lakh limit under section 24. This deduction can be claimed till total of the loan is repaid.

There are some conditions to claim this benefit under section 80EE:

  • This house has to be the first and only house property owned by you.
  • The total value of this house should not be more than Rs. 50 lakhs.
  • The loan amount should not be more than Rs. 35 lakhs.
  • The loan has to be taken from some scheduled bank or a Housing Finance Company.

In case of Joint Owners / Co-Borrowers:

Each of the joint owners, who are also co-borrowers of home loan, can independently claim a deduction on interest paid on the home loan up to Rs. 2 lakhs as allowed under Section 24 of the Income tax act and deduction allowed on principal repayments, including stamp duty and registration charges, building insurance under Section 80C within the overall limit of Rs. 1.5 lakhs, for each of the joint owners. These deductions are to be claimed in the same ratio as that of their ownership share in the property.

Simply being co-borrower is not sufficient to be entitled to claim the allowed deductions on the income tax, you have to be a joint owner of the house property also. For example the property is owned by a parent and he together with his son takes a loan where both sign as co-borrowers. Even if the loan is totally repaid only by the son yet the tax benefits on the home loan cannot be claimed by the son.

Deduction of Interest vs. Status of Construction:

The period from the date of disbursement of loan until construction of the house is completed is called pre-construction period. This deduction on home loan interest cannot be claimed during this pre-construction period.

  • Interest paid during this time can be claimed as a tax deduction in the next five assessment years in equal instalments, starting from the year in which the construction of the property is completed.
  • It can be claimed only from the assessment year the construction is completed. While in case of purchase of a constructed building, the allowed deduction can be claimed from the day the building is purchased and occupied.
  • In case the construction of the residential building is not completed within five years from the end of the financial year in which the loan was taken, the allowance of the deduction on interest gets limited to Rs. 30,000 only.

Regarding House Rent:

Scenario 1:

One is living in a rented house but one’s own house with a home loan running on it, is lying vacant.

Scenario 2:

One lives in a rented house and one’s own house is also let out:

In both cases, one can claim rent he is paying for the rented house as well as deductions as allowed under section 24, 80C and 80EE of Income tax act.

In case of ownership of a single house, these deductions can be claimed whether the house is self occupied, vacant or rented. Now after the interim budget 2019, this benefit has been extended to, in case of owning of even two houses by the same owner or any two houses in case of ownership of multiple houses, by the same owner.

In case the House is Let Out:

However, in case, one or both of the houses are even let-out, the total rent received is added to the owner’s main income however a standard deduction of 30% of the annual net value which means the total rent received during the assessment year, is allowed. This deduction is meant to cover, annual maintenance, fittings, building insurance etc., irrespective of the actual expenses incurred. However, the entire interest on housing loans of the rented property can be claimed as a deduction from the total income and there is no upper limit on the amount of interest that can be claimed as a deduction, under section 24 of the Income tax act.

Significant Budget Amendment in 2017:

If in case of a self occupied house, the interest paid on home loan exceeds the deduction on interest of Rs. 2 lakhs, as allowed under section 24 and Rs. 50,000 as allowed under section 80EE, in case it is applicable, the difference between the actual interest paid and the deductions allowed, is called the net loss on house property. Similarly in case of a let out properties, if the actual interest paid on home loan exceeds the total rent received in the year plus standard deduction of 30% as allowed on the total rent received in a year plus deductions as allowed under section 24 and 80EE. The difference between these two is termed the net loss on house property head in the income tax return. Till FY 2016-17, such loss under the head house property could be set off against other heads of income without any limit. However, by an amendment in 2017 by the government, from FY 2017-18 onwards, such set off of losses has been restricted to Rs. 2 lakhs per financial year. The balance could be set off, in consecutive eight years but the cap of Rs. 2 lakhs remaining for the subsequent years. Such loss can be adjusted only against income chargeable to tax under the head “Income from house property”.

In case of the Owner being a NRI:

All the deductions under section 80C or section 24 of the income tax acts and the standard deduction of 30% are also allowed to the NRI’s , in the same manner as Indian residents can do provided they file their income tax returns in India.

In case One Owns Multiple Houses:


However, in case of an individual owning more than one house, a different set of rules apply.

Scenario 1 (In case none of the properties is let out):

Current provision versus provision as proposed in the interim Budget 2019.

Earlier only one house property was considered to be as a self-occupied house property and normal deductions as allowed under section 80C and section 24 of the Income tax acts, as already discussed were allowed. But in case of more than one house properties, the second or third house despite being lying vacant were considered deemed rented property and a notional rent depending upon the quality of construction and their locality, were being assessed by the Income tax authorities and those rents were included in the owner’s main income and deductions towards interest repayment, which to make your claims easy, came with no cap, regardless of the construction status of the property. But, deductions under section 80C towards the principal repayment, could only be claimed on one of the houses, but the taxpayer is free to choose any of the properties as self-occupied house property based on his own discretion.

For the FY 2019-20 and onwards, after this interim budget proposals, you may have as many properties in your name, but government shall now consider two of your properties to be your ‘self-occupied’ properties in place of one. However, your maximum deduction as allowed under Section 80C and section 24 remains Rs. 1.5 lakhs and Rs. 2 lakhs respectively remains the same after aggregation on account of home loans of both the properties. The third and more houses in your name are categorized as deemed rented out. Here, the assumed rent income from these properties will be considered as your taxable income. The amount is decided based on the property rent rates of that area suitable for your property. The taxpayer still remains at liberty to choose any two properties as self-occupied house properties based on whichever property fetches the maximum benefit. The uncapped deductions on account of interest paid on third or subsequent houses can be deducted to the full but deduction on account of principal repayment under section 80C on the third or subsequent houses is not allowed.

Scenario 2 (In the case of Rented Houses):

As for as the rented houses are concerned, that might be first, second or third or so, the total rent received is added to the owner’s main income however a standard deduction of 30% of the annual net value which means the total rent received during the assessment year. Under Income tax act, it is meant to cover maintenance, building insurance premium of the buildings. However, the entire interest on housing loans of all the rented properties can be claimed as a deduction from the total income and there is no upper limit on the amount of interest that can be claimed as a deduction.

However, if the computation of rent and interest in respect of loans taken for all the properties in aggregate, results in loss from the house properties, then maximum of Rs. 2 lakhs of loss can be set-off against other heads of income and balance can be carried forward for 8 assessment years but that set off loss cannot be more than Rs. 2 lakhs per assessment year.Impact of amendment of 2017 and this proposal of 2019 on your tax savings.

The amendment of exempting income from two house properties may lead to lesser deduction of interest and corresponding amendment of 2017, restricting deduction of loss on house property only up to 2lakh a year, may lead to a taxpayer paying more tax in later years from the two self-occupied properties than what was paid before the Budget allowed total interest paid on a home loan on the second house was allowed a total deduction. This may happen in cases where the rentable value of the second property is less than the interest paid by the taxpayer for such property. “In such cases, prior to Budget, the taxpayer would have claimed deduction of the entire interest paid in respect of such property and would have set-off or carried forward the loss from such property. However, post-amendment, since the deduction of interest will be restricted to Rs 2 lakh in aggregate, the taxpayer will not be eligible to claim set-off or carry forward of such loss and thereby resulting in higher taxes.

Things you should know

  • Interest on housing loan can be claimed as a deduction only if the house property is constructed or purchased and ready to be occupied.
  • Interest paid prior to completion of construction of the property can also be claimed as a deduction over 5 years from the year of completion of construction. When the construction gets completed a completion certificate is issued after which you will also have to get an occupancy certificate, which is a must.
  • In case of property held jointly, the income from house property to be taxed in the hands of each co-owner is determined based on the deduction, you need to submit the home loan interest certificate that shows the ownership share, borrower details and EMI payments bifurcated into interest and principal.
  • Even if a house property is let out only for part of a year, then the house property would be considered as let out property for the entire year.