A home loan from a bank or a financial institution is the quickest and the most common route to becoming the owner of your dream home. However, taking a home loan also implies the beginning of a long-term burden for you, as you will have to keep aside a portion of your earnings to pay back the principal amount along with the loan interest. But what if there is an opportunity to save big on home loan EMIs? Well, the Interim Budget 2019, and the RBI’s recent policy change bring hopes for more savings on your home loan EMIs. Here’s how.
Interim Budget 2019 Gives Momentum to Home-Buying Instincts
Until now, the Income Tax Act allowed individuals to claim tax exemption on home loan interest, up to a maximum of Rs 2 lakh per year, on one self-occupied residential property. The pro-middle class Interim Budget, presented on February 01, 2019, proposes to relax the existing provision under the Income Tax Act.
Henceforth, taxpayers will get tax exemption on home loan interest for two residential properties, either occupied by the owner, or the immediate family members. This provides relief to individuals who have to maintain two houses for various reasons like job commitment, education of children, or for accommodating ageing parents.
As per the new Finance Bill, one is eligible for tax exemption on home loan interest, irrespective of whether both the residential properties are within the city limit, or in two different parts of the country.
Savings from tax exemption on the second home loan interest, not available earlier, will take care of a couple of EMIs.
RBI’s Repo Rate Cut Will Make Home Loans Cheaper
The Reserve Bank of India (RBI), after maintaining a status quo over key lending rates in the last two Monetary Policy Committee meetings, announced a repo rate cut by 25 basis points in its sixth bi-monthly monetary policy review.
Repo rate is the interest rate at which the central banking institution lends money to commercial banks.
The cut in the repo rate, announced by the RBI, will translate into a direct reduction in EMIs on home loans and all other banking loans. RBI Governor Shaktikanta Das has urged bankers to ensure a quicker transfer of the repo rate cut benefit to the end users.
Several banks, including the country’s leading home loan provider, the State Bank of India, have already reduced the interest rate on home loans. The rate cut in RBI’s latest monetary policy review will empower a large section of middle-class taxpayers, according to SBI chairman Rajnish Kumar.
The cut in the repo rate, as well as the new tax exemption policy on home loan interest, will together accelerate sales in the residential real estate market while providing great relief to home loan borrowers by reducing their EMIs. </p >