By Mukesh Goyal, Partner, Auric Group
Owning a home is not only a financially intensive decision but also an emotionally intensive one. While house ownership comes with a myriad of benefits such as asset building to freedom from rent payments, there are many financial perks of owning a home. Here is a lowdown on the financial benefits of owning a house.
When a person buys a home in India, he/she is entitled to many financial benefits in terms of tax rebates and concessions. Under Section 24 of the Income Tax Act, first-time homebuyers, who have availed of a home loan and are paying interest on the home loan can claim deductions on the interest paid. These deductions are capped at Rs 2 lakh per annum. Moreover, this house should be self-owned and not rented.
In addition to this, under section 80 C of the Income Tax Act, a homebuyer can claim tax benefits on the repayment of the home loan taken to finance a home purchase. These benefits are only applicable to properties whose construction is complete and are kept with the buyer for at least 5 years.
If that was not a sufficient benefit, these homebuyers can also claim an additional tax benefit of Rs 50,000 on interest repayment. This claim is over and above the tax benefits available under Section 24.
Subsidies under the PMAY
The Indian government is giving extraordinary support to the mission of 'Housing for All'. Under this mission, a flagship scheme of Pradhan Mantri Awas Yojana (PMAY) was launched. Under this scheme, homebuyers belonging to the economically weaker sections of the society and people from Lower Income Group (LIG) or Middle Income Group (MIG) get subsidies on the home loan availed to buy a house.
The annual income range of the household must be below Rs 18 lakh, under various categories. The government provides a subsidy between Rs 2.37 lakh to Rs 2.67 lakh to the eligible homebuyers.
No More Rentals
When you make a decision to buy your own home, you take the step towards ownership of an invaluable asset. While living on rent and paying the monthly instalment does not create an asset for you. As soon as you decide to buy a home, your hard-earned money is invested in your own home. Even if you decide to take a home loan, the monthly rentals get converted into Equated Monthly Installments (EMIs). Unlike rentals, this monthly expense will take you closer to homeownership every month. The creation of an asset of a lifetime will save a lot of money in the long run.
As soon as you invest in a property of your own, you can give a part or whole (if not using it) of the property for rent. This rental income will actually finance your home loan EMIs. If the rent is more than the EMIs, you can actually save money. Even if you are living on the premise, renting a part of it will certainly add to your monthly income. If the portion on rent is in the form of a basement or a shop, you can actually get higher rentals every month.
Ownership Leads to Wealth
Unlike a rented place, a home of your own will create a valuable asset for you and the generations to come. A home bought decades ago but at a prime location will fetch unbelievable returns in case of sale. Leave aside the sale, the property ownership itself will save a lot of money that would have gone down the drain while living on the rent.
Conclusively, in addition to the ownership of a home, these financial perks must be enough to encourage you to get a home of your own.