Home Loans Likely to Have Higher Tax Breaks After Budget 2017

Home Loan Takers May Get Bigger Tax Relief

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Home Loan Takers May Get Bigger Tax Relief

Union Budget 2017 is expected to bring good news for home buyers and real estate sector. The government may introduce higher incentives on home loans. It will be a step towards making Pradhan Mantri Awas Yojana (PMAY) a grand success as well as boosting the realty sector which has been badly hit by demonetisation.

According to a report by consulting firm Knight Frank, real estate industry which was already faltering in the last year registered an estimated revenue loss of Rs. 22,600 crores. This happened due to a steep fall of 44% in demand post November 8 when Rs. 500 and Rs. 1,000 notes were scrapped.

The government already favours construction sector as it generates huge employment opportunities. It also contributes to the growth of cement, steel and construction material making industries. So, it keeps on coming with incentives to support it. Recently, it announced interest subsidies of 3% on loans up to Rs. 12 lakhs and 4% on loans up to 9 lakhs under PMAY. This move was targeted towards enabling weaker sections of the society to be able to afford their own home. Demonetisation inflated deposits in the banks which were pushed to lower interest rates on home loans. However, this was not enough to drive sales of realty sector.

Experts believe that tax benefits available to home buyers are not justified. Although Union Budget 2016 brought additional tax benefit of Rs. 50,000 for first time home buyers, the overall tax relief was always felt short of adequate by the citizens. Taxpayers get a deduction on repayment of principal amount of their home loan. The maximum deduction available is Rs. 1,50,000 but the benefits are clubbed with several other advantages under section 80C. The government may come up with a separate cap for repaying the housing loan. Taxpayers also get tax benefit up to Rs. 2 lakhs on payment of interest payment on their home loan. This benefit can be increased which will provide a fillip to the salaried individuals.

Experts are also of the opinion that the current limit of Rs. 2 lakhs is insignificant given the ticket sizes in cities, especially in bigger metros like Mumbai and Delhi, where an overwhelming majority of the available housing is priced at, or above, Rs. 1 crore. The government should, therefore, increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. Also, the tax exemption limit should be auto-set to match inflationary trends in a Financial Year.

Realty sector is a significant contributor to country’s GDP and therefore giving tax relief to home loan takers will hopefully and finally bring it the industry out of its misery. Just a week from now, the government will announce Union Budget 2017, and we will find out what gifts it brings for the taxpayers.

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Niteesh Singh
Niteesh Singh
Niteesh works as a Tax Researcher at H&R Block India. He makes taxes easy to understand for people. He creates content for the website, marketing activities and social media. He carries experience in creating a wide variety of content like blogs, press releases, research papers, etc.

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