How the Union Budget has brought relief to Housing Loan Borrowers

The Union Budget for 2018 has been announced and it has brought some relief for those with home loans. This budget has brought with it a number of tax benefits on home loan. This has come as quite a relief for tax payers and has made it a little bit easier for people to become home owners. With financial year winding down, you’re probably wondering how to save income tax. You should also know whether, after paying your Income Tax for the year 2017-2018, it will still be a feasible option to buy that new flat you’ve had your eye the whole year.

Investing in property in India has always been a great way to ensure that you get heavy returns. But with the property rates always soaring, home loans are the only way one can afford property here. Now, the Income Tax Act already has some provisions and tax exemption on Home loans. Like the Section 80C where you can claim upto Rs. 1,00,000 as a deduction for repayment of home loan. But has this year’s Union Budget brought any more relief to home loan borrowers? Let’s find out.

As per this year Union Budget, those who have availed homeloans before April 2016, and are stuck in the older base rate regime, may get cheaper. The RBI has decided to "harmonise the methodology of determining benchmark rates by linking the Base Rate to the MCLR or Marginal Cost of Funds based Lending Rates with effect from April 1, 2018". 

The RBI, in a bid to reduce the burden of home loan interest rates on the borrowers, had introduced a Marginal Cost of Funds-based Lending Rate (MCLR) system with effect from April 1, 2016. This was done due to the limitations of the base rate regime. With the introduction of the MCLR system, it was expected that the existing base rate-linked credit exposures would move to the new system. This effort was taken after huge amounts of funds were deposited into banks during demonetization drive in India. 

Banks and NBFCs have cut their home loan interest rates by as much as 50 basis points. This makes a huge different in the amount of EMIs and the number of EMIs borrowers have to pay. This benefit will mainly affect those who have acquired a home loan after April 2016, but others can avail of its benefits too, by opting for a home loan balance transfer.

If you were waiting for the Union Budget to find out if it offers you any new housing loan tax benefits then you will not be disappointed.