Subsidy on home loan is a very important factor for people with small means to own a house of their own. In order to encourage owning of the house common man the government of India had announced “Prime Minister Awas Yojna” (PMAY) scheme under “Housing for all by 2022” mission. In addition to given incentives to builder the government has introduced a novel scheme of subsidy on home loan and has introduced “Credit Linked Subsidy Scheme (CLSS) under which the government provides subsidy on home loan interest to individuals. There are various CLSS schemes to provide subsidy on home loan depending on your income level. The categories are divided into Economically Weaker Sections (EWS), Lower Income Group (LIG) and Middle income Groups (MIG1 and MIG 2). Let us discuss.
Basic Eligibility Criteria for availing the Credit Linked Subsidy
All the loans availed under the CLSS are mandatorily required to be linked to the Aadhaar Number. The benefit under these schemes can only be claimed if the family does not own any pucca house on the date of making home loan application. These benefits are available only in respect of the home loans which are sanctioned after 1st January 2017. Major sons and daughters who are earning independently are also eligible and entitled to avail subsidy separately for their 1st home under this scheme. So for the purpose of eligibility of the family under this scheme, the house if any owned by major earning sons and daughters shall be ignored. The benefit of CLSS can also be availed in case of transfer of home loan from one lender to other provided the benefit under CLSS was not availed earlier lender.
Scheme for EWS and LIG
For a borrower to be eligible under the category of EWS, the annual income of all the family members taken together should not be more than 3 Lakhs. The next category which is eligible for credit linked subsidy scheme is LIG which is defined as family having the household income between 3 lakhs and 6 lakhs. Under this scheme interest subsidy @ 6.50% is provided on the loan taken for maximum tenure of 20 years as per the revised guidelines earlier the maximum tenure for which the benefit under the CLSS was available was 15 years. The home loan can be taken for the purpose of buying or constructing a new house. The subsidy can also be availed for repairing or extending existing kuccha or semi Pucca House.
In order to qualify for being able to claim benefits under this scheme no member of the family should own an all weather pucca house on the date of taking the home loan. The house should be purchased in the name of a female members of the family or should be bought jointly with the wife. The condition of having the house in the name of female member is not applicable in case the house is constructed on the plot of land already owned by the family or the loan is taken for extension or repair of an existing house. For the EWS the size of the house should not exceed 30 Sq Mtrs. However for LIG category the size of the house is larger upto 60 Sq Mtrs. The maximum amount of loan which qualifies for the CLSS is Rs. 6 lakhs for both the categories of the borrowers. The maximum benefit available under this scheme is Rs, 2.67 Lakhs.
Credit Linked subsidy scheme for MIG category
This scheme applies to all the towns as per the 2011 census and also to the tows which have been notified later on. Presently this scheme is available for home loan taken till 31-023-2019. Under this category, the first category known as MIG 1 will be able to get an interest subsidy @ 4% p.a. on lower of actual home loan taken or Rs. 9 lakhs in case the amount of home loan is higher than 9 lakhs. The size of the house to be purchase/constructed under MIG 1 category should not exceed 160 Sq. Mtrs. The maximum value of the benefit under this category of beneficiaries is around Rs. 2.35 Lakhs. For being eligible under this scheme the income of the household should be between Rs. 6 lakhs and Rs. 12 Lakhs.
Under the second category of borrower under MIG known as MIG 2 qualify the families whose household income exceeds Rs. 12 lakhs but does not exceed Rs. 18 lakhs. They are entitled to interest subsidy @ 3% of the maximum of Rs. 12Lakhs of home loan. The amount of home loan may be higher than the eligible home loan amount but the benefit of interest subsidy under CLSS shall be restricted with reference to Rs. 12 lakhs of home loan in such cases. The size of the house to be acquired under MIG 2 category is restricted to 200 Sq. Mtrs. The maximum benefit of subsidy under this category is around Rs. 2.30 Lakhs.
Method of computing the subsidy
Under both the categories of CLSS the present value of the benefit of interest subsidy at the rate applicable (6.50% for EWS and LIG and 4% for MIG1 and 3% for MIG 2 categories) will be discounted at the rate of 9%. The present value of the interest subsidy as discounted @ 9% is reduced from the amount of the home loan and the Equated Monthly Instalment (EMI) is calculated accordingly.
The CLSS has been helping people who do not own any house in fulfilling their dream of owning a house of their own.