Pradhan Mantri Awas Yojana (PMAY)

A home is everyone's dream, a place where we create most of our memory but for many of us, a home still seems out of reach well, not anymore! Because the Government of India's new Pradhan Mantri Awas Yojana (PMAY) aims to ensure housing for all. The Pradhan Mantri Awas Yojana or PMAY Credit linked Subsidy Scheme that offers the subsidy on interest levied on Housing Loan. This scheme is applicable to Economically Weaker Sections (EWS), Low Income Groups (LIG) and Middle Income Groups (MIG). The benefits of Pradhan Mantri Awas Yojana (PMAYScheme can be availed for new or resale purchase for a home, construction, extension or improvement of the Rooms, Kitchen, Toilets, etc. 

Wealthy Era Pradhan Mantri Awas Yojana (PMAY)
Pradhan Mantri Awas Yojana (PMAY) 

So, if your combined household income is up to
 INR 6,00,000 Rupees and you belong to Economically Weaker Sections (EWS) or Low Income Groups then you can claim interest subsidy of 6.50% for a loan amount up to INR 6 Lakh, maximum amount can be INR 2,67,280. If your combined household income is between INR 6,00,001 to INR 12,00,000 then you belong to Middle Income Groups 1 (MIG1) under Pradhan Mantri Awas Yojana (PMAY). Hence you can avail interest subsidy of 4% for a loan amount up to INR 12 Lakh, the maximum amount can be INR 2,35,068. Likewise, if your combined household income is between INR 12,00,001 to INR 18,00,000 then you belong to Middle Income Groups 2 (MIG2) under PMAY, also you can avail interest subsidy of 3% for a loan amount up to INR 12 Lakh, the maximum amount can be INR 2,03,156. All these subsidies are calculated for the tenure of 20 years.

With Pradhan Mantri Awas Yojana (PMAY) your Effective interest rate can be around 2.63%. Let's take an example, for instance, you finalized a home worth INR 30,00,000 and you get a loan of INR 24,00,000 (i.e. 80% of property value). Now with this scheme, you fall under Middle Income Groups 2, you will get the subsidy of INR 2,03,156 on the interest over the loan which means you will have to pay INR 21,69,844 (24,00,000 - 2,03,156 = 21,69,844) against INR 24,00,000 due to Pradhan Mantri Awas Yojana subsidy benefits. in addition, you will also get Income tax rebait on 30.9% on interest paid up to INR 2,50,000 and principal paid up to INR 1,50,000. Accordance to Section 80 CSection 24 and Section 80 EE of The Indian Income Tax Act. Therefore, the actual benefit after Tax deduction and including Pradhan Mantri Awas Yojana (PMAY) subsidy after 14 years will be as follows:

Amount (INR)
Interest payment   (a)
Tax saved**   (b)
Payment by consumer post Tax benefits  (a-b)
PMAY subsidy  (c)
Net payment by the consumer  (a-b-c)

** Total Tax saved is calculated at 30.9% on Loan Amount of INR 21,69,844/-

Net Payment ÷ Total loan Amount = Effective Rate of Interest on  INR 24,00,000 Loan 

        63,209        ÷           24,00,00        =        2.63%

Note in some case Effective Rate of Interest can be changed.

Eligibility Criteria of Pradhan Mantri Awas Yojana (PMAY

  • You can only apply for this scheme as an individual applicant only.
  • The number of applicants can be up to 6, these applicants must be 18+ 
  • applicants who never own a Pucca House (Applicable only for the first Home buyer)
  • In case of renovation or extension the carpet area of the property should not be more than 30 Sq Meters for EWS, 60 Sq Meters for Low Income Groups (LIG), 90 Sq Meters for Middle Income Groups 1 (MIG1) and 110 Sq Meters for Middle Income Groups 2 (MIG2). 

Subsidy benefits will directly be credited to the consumer Loan Account. Interest subsidy benefits are treated as a part payment to the Loan, thus reduce the Loan amount to the customer. If you are receiving Interest subsidy benefits then your EMI for the loan will be reduced, but the tenure will be the same.

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