Getting a good deal on a house, somewhere in the suburbs? Check if it costs you less than Rs20 lakh. Because, in that case, you stand to save 1% of the interest burden on your home loan.

Finance minister Pranab Mukherjee on Monday, replying to the debate on the Union budget, proposed to “provide support to borrowers by way of interest subvention of 1% on all housing loans up to Rs10 lakh to individuals, provided the cost of the house does not exceed Rs20 lakh”. The loan rebate will be available for one year.

“I am sure that both the expenditure and tax foregone would provide relief to a large segment of prospective home owners and help revive the real estate sector,” Mukherjee said, while announcing what he described as the fourth stimulus package.

Interest subvention means that the government will pick up part of the interest burden on a home loan: Rs1,000 crore have been allocated for this purpose. So borrowers of loans up to Rs10 lakh for homes worth less than Rs20 lakh will have to pay a lower EMI to the bank. The government, in turn, will reimburse the bank. This would mean a one-time saving of Rs7,596 for anyone who takes a Rs10 lakh, 20-year loan at an interest rate of 9%, and is given a subsidy of 1%, taking his effective interest rate down to 8%.
This interest subsidy will be routed through schedule commercial banks and the housing finance companies registered with the National Housing Bank.

Other than this, Section 80E benefits have also been extended to the legal guardian of the student. Until now, these were available to an individual if he or she had taken an education loan for self study or for studies of the spouse or children. Section 80E allows a deduction of up to Rs40,000 from the taxable income for interest paid on an education loan. 

Deductions available under Section 80U to mentally challenged individuals as well as individuals suffering from permanent physical disability have been increased. An individual who suffers from a permanent physical disability is allowed an adhoc deduction of Rs50,000. If the disability is severe in nature the deduction is higher, at Rs75,000. The deduction allowed for severe disability has been increased to Rs1 lakh from the current Rs75,000.