All you want to know about PMAY subsidy

Owning a home is one of the top needs of all families. If you do not own a home and you are planning to get financial assistance for buying one, then you may be eligible for Pradhan Mantri Awas Yojana – Credit Linked Subsidy Scheme. It covers most segments of the Indian society comprising of Economically Weaker Sections (EWS), Low Income Group (LIG) and Middle-Income Groups (MIG I and II). 

You may be curious about PMAY subsidy. While it is a great scheme, the subsidy offers grants in interest rate payable on home loans to make home purchasing more within your means.

Who is eligible for CLSS under PMAY?

You should meet these conditions to be eligible for CLSS – 

Must live in any of the legislative towns according to the Census of India 2011 and those announced subsequently.

None of your family members or you should have a pucca house anywhere in India.

None of your family members (spouse and unmarried children) or you should have availed of any support under any central schemes from the Government of India or under any element of the scheme. 

Keeping in mind the objectives of PMAY, adult earning member regardless of their marital status, are deemed as a separate household.

Advantages of CLSS under PMAY:

CLSS scheme offers a subsidy on the interest payable on your home loan depending on stipulated conditions. It aids vary depending on which segment of the society you belong to:

Type: MIG I: You belong to MIG I if your annual household income is above INR 6 lakh but below INR 12 lakh and the house you are buying, or building has a maximum carpet area of 160 sq. mts.

Advantage: You get a subsidy on interest rate up to four per cent on the maximum home loan amount of INR nine lakh.

Type: MIG II: You belong to MIG II if your annual household income is above INR 12 lakh but below INR 18 lakhs and you are building or buying a house with a maximum carpet area of 200 sq. mts.

Advantage: You get a subsidy on interest rate up to three per cent on the maximum loan amount of INR 12 lakh.

Type: LIG and EWS: LIG and EWS types are defined as those whose annual household incomes are above INR three lakh but below INR 6 lakh. CLSS benefits are relevant if you are purchasing or building a home with a maximum carpet area of 60 sq. mts. A female member of the family should be the owner or co-owner of the house.

Advantage: You get a subsidy on interest rate up to percent. The grant is limited up to a maximum loan amount of INR six lakh.

Period: For all types, the interest subsidy is given for a duration of up to 20 years.

How to avail the subsidy?

For availing the subsidy under PMAY, your home loan should have been authorized on or after January 1, 2017 and the plan is effective till March 31, 2022 in case of EWS/LIG categories and March 31, 2020 for MIG segments. You need not claim the subsidy in person. The lenders take care of the same. You need to register a declaration validating that you meet the admissibility criteria. On successful acceptance, the concerned loan provider will make a claim on your behalf and process all the requisite paperwork. Once the relevant authority approves the loan subsidy, your home loan account will be automatically credited with the amount. PMAY has made homeownership simpler and economical for first-time buyers.

Here’s everything you need to know about the tax benefits of PPF

PPF or Public Provident Fund is a small savings scheme with the objective to get people to save funds for their retirement. The PPF account has an initial lock in period of 15 years which can be extended in blocks of 5 years at a time. In spite of the lock in period, this scheme is one of the most popular schemes among the public, primarily for the rate of interest and the tax benefits on the scheme. It is very easy to open PPF account online and offline. To open PPF account online, you need to fill up an account opening form on the website of the bank and deposit your first contribution and the formalities will be processed by the bank. You can also visit a bank branch, fill up an account opening form.

To promote a saving habit among the people, the Government gives tax incentives on a PPF account. It is important to understand these tax benefits so that you can plan for your investments. Knowing the impact of taxation on your investments can help you plan the right amount that you can invest and also how long you should stay invested in the scheme.

The tax benefits of a PPF account can be divided into 3 parts depending on the three stages of investments:

Investment Stage: Any investment made in a PPF account gets a deduction under Section 80C of the Income Tax Act up to Rs. 1,50,000. The minimum deposit amount is Rs. 1,000. This amount is deducted from the gross taxable income of the depositor. However, this deduction competes with the other deductions in Section 80C. There is no other special section and benefit carved out for PPF. This investment or contribution can either be made in a lumpsum amount or through deposits throughout the year. The scheme does not distinguish between that.

Accrual Stage: Interest on a PPF account is calculated monthly and credited to the account at the end of the year. The interest earned on PPF is exempt from tax. This means it is not considered as taxable income and does not affect your tax slab. However, exempt income has to be declared in the Income Tax Return. This is a departure from the tax treatment for other instruments like National Savings Certificate or Senior Citizens Savings Scheme (SCSS) which provide a deduction at investment stage but the interest income is taxable. The PPF returns increase significantly because the interest income is not taxable. Over a 15 year lock in period, this interest compounding helps to grow capital at a faster rate. 

Withdrawal Stage: The withdrawal for NPS is exempt up to 60%. This means 40% of the withdrawal is taxable and the investor has to pay tax on this at slab rates. However, in case of PPF, the entire withdrawal amount is exempt from tax which means it is not considered a part of the depositor’s income. 

This triple tax advantage on a PPF investment makes it one of the most popular investment options till date.