New subsidy scheme for home loan borrowers

Home loan borrowers have had a lot to cheer about lately. Banks have cut lending rates by 1-1.2 percentage points over the past year, reducing the monthly EMI (equated monthly instalment) for borrowers. For the middle-income category, the Centre’s credit-linked interest subsidy scheme brings more good tidings. The scheme, effective from January 1, 2017, offers an upfront interest subsidy of up to Rs.2.3-2.35 lakh to eligible borrowers availing themselves of loans to buy ready-to-use or under-construction property. A lowdown on how you can benefit from the scheme.

The newly-launched credit-linked subsidy scheme for the middle income group, referred to as CLSS-MIG, covers two income segments — Rs.6,00,001 to Rs.12 lakh (MIG-I) and Rs.12,00,001 to Rs.18 lakh (MIG-II) per annum. Those under the MIG-I category will be offered interest subsidy of 4 per cent for loans up to Rs.9 lakh and under MIG-II an interest subsidy of 3 per cent for loans up to Rs.12 lakh. The subsidy will be calculated at 9 per cent NPV (net present value) of the interest savings over 20 years or the actual tenure, whichever is lower. The subsidy could work out to a maximum of Rs.2.3-2.35 lakh per beneficiary.

the scheme is opened only until December 31, 2017. This implies that the property (if under construction) has to be completed in a year. Else you will not be able to receive the subsidy. To avoid uncertainty, it may be better to go for a ready-to-use property. Home loan borrowers under the scheme can also get the usual tax benefit. Under Section 80C of the Income Tax Act, maximum deduction of up to Rs.1,50,000 is available on the principal amount. Under Section 24, interest that is paid towards the home loan is exempt up to Rs.2 lakh. Remember though that you can claim exemption only on the net interest you pay and not on the subsidy component.

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