The NaMo government launched the Pradhan Mantri Awas Yojana (PMAY) program in June 2015. It is a scheme that offers interest subsidy on home loans under the new Credit Linked Subsidy Scheme (CLSS) issued by the Ministry of Housing and Urban Poverty Alleviation. Individuals having annual income above 18 lakhs are now eligible to apply for a loan of 12 lakhs that would interest subsidy of 3% and 4% on a loan of 9 lakhs.
This policy was chiefly proposed to provide affordable housing facilities to people belonging to the economically weaker sections of the society and people from low-income groups. The policy is aided by most of the premier finance companies in India like Indiabulls Home Loans to help individuals fulfill their dreams of having their own homes.
How to avail these loans?
It is very easy for anyone who has a home loan subsidy eligibility to avail PMAY linked loans from basic lending institutions such as commercial banks, Regional Rural Banks, housing finance companies, Cooperative banks (both urban and state), any Non-Banking financial company, etc. According to the income criteria under the mentioned scheme, these institutions do not ask for processing charges for these types of housing loans. In case any individual requests for an amount more than the eligible criteria, for interest subsidy, they could be charged a nominal fee according to the institution’s regulations.
Other tax incentives
The main goal of introducing this scheme was to encourage homeowners to initiate investment in real estate with more will. But with just reduced rates of interest on loans provided by commercial banks or NBFCs, it is not enough parameter to reach the desired end. There is a continuous requirement for an increase in the current exemption of interest from the ongoing amount mentioned in section 24(b) of the Income Tax Act, 1961. Alongside, it is also requisite to increase the interest limit offered to individuals white taking any particular Home loan from any financial institution. The interest paid by an individual on a housing loan according to a rented or self-occupied house can be easily adjusted with the income of an assessed subject as long as it does not exceed a limit of INR 2lakhs. This criteria, in turn, reduces the tax liability of individual and when offered rightly, concentrates more money in the hands of the taxpayer which they can potentially put to investment in the real estate sector. According to the majority of taxpayers, the best means of investment for tax planning are houses as seen from a long term view.
Income Tax benefits under PMAY scheme
According to the Pradhan Mantri Awas Yojana details provided to the general public, it is very simple to avail Home loan under PMAY scheme if you have home loan subsidy eligibility. The PMAY CLSS subsidy that is available mainly for existing Home Loan subscribers belonging to LIG, EWS, MIG 1&2 category can claim all tax benefits entitled under section 24B and 80C that is designed primarily for the benefit of the home buyer.
In short, it can be said that the main goal of these grants and tax rebates is to reduce the burden falling on the person paying the EMI. It is in no way applicable that the PMAY home loan or PMAY CLSS pays off the whole payable value, but only a part of it so the remaining amount has to be paid by the borrower from his own pockets.