How can a first-time home buyer save money?

First-time home buyers can save money for purchasing a house in the following ways: Open a high-interest savings account Invest in government schemes or mutual funds Avoid unnecessary expenses Pay off existing debts Place your surplus earnings, bonuses, etc. in a separate fund

Is stamp duty free for first-time buyers?

No. As a first-time buyer, you are required to pay stamp duty charges, which can be later claimed to the tune of Rs. 1.5 lakh under Section 80C of the Income Tax Act. You can avail this deduction while filing your annual income tax returns.

What is the additional tax exemption for first-time homebuyers?

First-time homebuyers can secure additional tax exemptions up to Rs. 1.5 lakh under Section 80 EEA for affordable housing, which is over and above the usual deduction of Rs. 2 lakh under Section 24. However, if they have already secured the benefits under Section 80 EE, they cannot be deemed eligible for claiming the advantages under Section 80 EEA.

First-Time Homebuyers' Benefits in India

4 min 14 Jul 2023

Highlights:

Benefits for First-Time Homebuyers
Tips to Plan Your First Home Purchase

Real estate ownership and investments always rank high on every individual’s wish list. With the thrust on affordable housing for all, shelter and housing needs have taken centre stage in recent years. As one of life’s basic necessities, house purchases consistently remain on an upswing, which is why, the Indian government incentivises housing finance by providing substantial tax relief, especially to first-time homebuyers and women house owners, making it easier to avail of a property by lowering the burden of debt.

Here is a detailed look at the various first-time homebuyer benefits and how one may claim them.

Who is Considered a First-Time Homebuyer?

Contrary to popular belief, a first-time homebuyer is not necessarily someone who purchases a house for the first time. Individuals who have not bought a primary property in the last three years may be termed first-time homebuyers.

Tax Benefits Available for First Homebuyers

If you wish to avail of housing finance for buying a new house, you can enjoy a number of tax benefits on Home Loans under the Income Tax Act, 2025. Eligible loan borrowers may claim these concessions on the principal and interest components of their loan at the time of filing their income tax returns during each financial year. Given below are some of the provisions that permit combined tax savings up to Rs.5 Lakh annually under Section 123, Section 22, Section 130 and Section 131:

Deduction of Principal Amount Under Section 123

Borrowers are entitled to tax relaxations up to Rs.1.5 Lakh on the principal repayment of their house loans.

Tax Deduction on Interest Paid Under Section 22

Housing loan interest paid up to Rs.2 Lakh is deductible from the gross total income while calculating income from self-occupied house properties. This is applicable in cases where the acquisition or construction of the house has been completed within five years of originally taking the loan.

Extra Tax Relief Under Section 131 and Section 130

First-time homeowners under the affordable housing category can claim additional deductions under Section 130 and Section 131 of Rs.50,000 and Rs.1.5 Lakh, respectively, on the interest portion of their loan EMI repayment, subject to fulfilling certain conditions. However, you can obtain exemptions only under one of the two sections, depending on when the loan was sanctioned.

Below is a comparison of the basic difference between the two sections:

Particulars	Section 130	Section 131
Maximum deduction limit	Rs.50,000 (on the interest component of the loan EMIs paid in a year)	Rs.1.5 Lakh (only on the interest portion of the EMIs paid annually)
Applicable to	Home Loans availed in FY 2016-17	House loans secured between 2020 and 2022
Other conditions	Only first-time owners qualify for the provision benefits The value of the property must not be over Rs.50 Lakh The loan amount must not exceed Rs.35 Lakh	Applies to first-time owners only The carpet area of the property should be within 60 sq. m. (645 sq. ft.) for metro cities and 90 sq. m. (968 sq. ft.) in case of other towns and cities The stamp duty paid on the house should be below Rs.45 Lakh

Particulars

Section 130

Section 131

Maximum deduction limit

Rs.50,000 (on the interest component of the loan EMIs paid in a year)

Rs.1.5 Lakh (only on the interest portion of the EMIs paid annually)

Applicable to

Home Loans availed in FY 2016-17

House loans secured between 2020 and 2022

Other conditions

Only first-time owners qualify for the provision benefits
The value of the property must not be over Rs.50 Lakh
The loan amount must not exceed Rs.35 Lakh

Applies to first-time owners only
The carpet area of the property should be within 60 sq. m. (645 sq. ft.) for metro cities and 90 sq. m. (968 sq. ft.) in case of other towns and cities
The stamp duty paid on the house should be below Rs.45 Lakh

Tax Concession for Non-Receipt of House Rent Allowance (HRA)

Individuals who buy a house for the first time can secure rebates under Section 134 if they are not entitled to HRA from their employers. This provides relief on expenses exceeding 10% of total income towards their rent payment.

Deduction on GST

A 12% subsidy, previously levied on houses acquired under the Pradhan Mantri Awas Yojana, has been reduced to 8% since 2018. This means that first-time homeowners with average earnings of Rs.18 Lakh can enjoy benefits up to Rs.2.7 Lakh instead of the earlier sum of Rs.2.5 Lakh.

Deduction on Subsidy Slabs

As part of the Pradhan Mantri Awas Yojana subsidies, home buyers with an annual income of Rs. 12 Lakh can claim a 4% subsidy on principal amounts of Rs.9 Lakh. Besides that, a 3% subsidy is extended on Rs.12 Lakh principal sum for a salary of Rs.18 Lakh per year.

Pradhan Mantri Awas Yojana (PMAY)

First-time home buyers belonging to the Economically Weaker Sections (EWS), Lower Income Groups (LIG) and Middle-Income Groups (MIG) can claim the following tax concessions on Home Loans under PMAY:

Income Group	Limit of Loan Grant	Income Eligibility	Subsidy on Interest
EWS	Up to Rs.6 Lakh	Earnings below Rs.3 Lakh per annum	6.5% on interest
LIG	Up to Rs.9 Lakh	Annual income under Rs.6 Lakh	4% on interest
MIG	Up to Rs.12 Lakh	Annual salary less than Rs.12 Lakh	3% on interest

Smart Advice To Help You Plan Your First Home Purchase

Purchasing your first home involves judicious planning and utilisation of the available funds. When looking for the ideal home, one usually considers these crucial aspects:

Location and neighbourhood
Property price
Construction quality
Amenities, conveniences and infrastructure
Facilities, connectivity, etc.

Selecting the right property is just one facet of your home-buying plans. Below is a quick guide on several other considerations:

Arranging the Requisite Funds

Your financial profile should always strike a balance between your savings and the debts you undertake. While paying for the house with your own investments and monetary resources is the ideal option, diluting all your savings is never a good idea. Besides, one needs to ensure sufficient liquidity for adverse situations.

Opting for a Home Loan

In case you find it difficult to manage the entire property purchase on your own, you may opt for housing finance. But before you take up a Home Loan, get a fair estimate of how much loan you might be eligible for and whether you can make the repayments comfortably.

Home Loan Eligibility

While examining loan eligibility, lending institutions will closely evaluate multiple aspects, each of which might act as a deciding factor on its own. These include:

Credit score and repayment history
Age of the applicant
Business/job profile
Monthly income
Existing liabilities
Property details, etc.

If your credit score is low, lenders will be wary of offering you a loan. However, a good credit record and excellent CIBIL scores of 750 or higher will establish you as a responsible borrower who can repay loans on time, thereby fetching you attractive deals at competitive interest rates.

Similarly, younger loan applicants are far likelier to receive preferential loan offerings as compared to older applicants who may be nearing the end of their service years. Other parameters are also carefully appraised to verify your personal, professional and credit profile to assure lenders of your repayment abilities within the stipulated tenure.

Property Value

As per the Reserve Bank of India norms, you can secure a specific proportion of the property’s current market price as a loan, better known as loan-to-value ratio (LTV). The RBI-mandated LTV restrictions for determining principal amounts are as follows:

When you apply for a loan of Rs.30 Lakh, you can receive approvals up to 90% of the property’s value
Borrowers can expect housing finance up to 80% if they seek loan principals in the range of Rs.30 Lakh to Rs.75 Lakh
For loan amounts higher than Rs.75 Lakh, the expected LTV is 75%

Note: Keeping in mind the risks associated with credit transactions, lenders may reduce the LTV.

Summing Up

As a first-time homebuyer, research your property options in line with your loan eligibility and requirement to maximise the loan benefits. See if you qualify for any government housing schemes. If you wish to avail of a Home Loan, remember to first scout around for lenders offering the lowest Home Loan interest rates. Access a Home Loan EMI calculator to compare the interest rates of other lenders for choosing the best deal. Confirm if there are other related costs and factor them into your calculations. This way, you can establish the overall cost of your credit and its viability.

DISCLAIMER:

While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.

Frequently Asked Questions:

First-time home buyers can save money for purchasing a house in the following ways:

Open a high-interest savings account
Invest in government schemes or mutual funds
Avoid unnecessary expenses
Pay off existing debts
Place your surplus earnings, bonuses, etc. in a separate fund

No, as a first-time buyer, you are required to pay stamp duty charges, which can be later claimed to the tune of Rs.1.5 Lakh under Section 123 of the Income Tax Act, 2025. You can avail this deduction while filing your annual income tax returns.

First-time homebuyers can secure additional tax exemptions up to Rs.1.5 Lakh under Section 131 for affordable housing, which is over and above the usual deduction of Rs.2 Lakh under Section 22. However, if they have already secured the benefits under Section 130, they cannot be deemed eligible for claiming the advantages under Section 131.

Buying a home for the very first time often comes with certain advantages. There are tax benefits under different Sections of the Income Tax Act, 2025, allowing deductions on both the loan principal and the interest you repay.

If you are purchasing under the affordable housing category, you may be eligible for additional relief through provisions such as Section 130 or 131. Alongside this, government initiatives like the Pradhan Mantri Awas Yojana extend subsidies that ease interest obligations.

First-time homebuyers who have availed of a Home Loan to purchase a property can claim the following benefits:

On the principal repayment, you can claim deductions of up to Rs.1.5 Lakh each year under Section 123.
When it comes to interest, up to Rs.2 Lakh annually is allowed under Section 22 for a self-occupied property, provided the construction or purchase is completed within five years.
For those who fall within the affordable housing segment, there are additional deductions available. Section 130 permits up to Rs.50,000 on interest, while Section 131 extends this benefit further, offering up to Rs.1.5 Lakh, provided the property value doesn’t exceed Rs.50 Lakh and the loan amount is not more than Rs.35 Lakh.