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The deduction ceiling under Section 80C was last increased in 2014 (to Rs 1.5 lakh per year), and an upward modification has been long overdue.
The real estate market appears to be favoring property purchasers at the moment, due to prices that have been generally consistent in recent years, low home loan interest rates, and a wide range of housing alternatives to pick from. The augmentation of tax sops in the next Union Budget 2022, however, is one major aspect that can greatly improve house buying demand. The following are the expectations.
Home loan principal repayment is deducted separately
The repayment of a home loan principle is deductible under section 80C of the Income Tax Act of 1961. Apart from house loans, a variety of other investments and costs are eligible for deduction under Section 80C, which has a ceiling of Rs 1.5 lakh per year. This restriction has not been increased in a long time, but it is expected to be increased this year. “Personal tax relief, whether in the form of lower rates or better-adjusted tax slabs,” says Anuj Puri, head of the ANAROCK Group. “The last increase in the deduction limit under Section 80C (to Rs 1.5 lakh per year) was in 2014, and an upward revision has been long overdue,” he adds.
Many people believe that a separate section for house loan principal payments should be added to the tax code. “The government should enable a separate deduction of Rs 1.50 lakhs on the principal repayment of house loans under section 80C,” argues Kanika Gupta Shori, Square Yards’ co-founder and COO. Because section 80C provides for a variety of investments/expenditures, such as PF, PPF, and life insurance policies, middle-class taxpayers typically use up the majority of the rebate on these assets before investing in a home. This limits the taxpayer’s ability to claim advantages related to loan principal payments. A separate deduction will bring relief to the borrower and pique his interest in purchasing a home,” Shori says.
Enhance deduction on home loan interest
Although current house loan interest rates are below 7% per year, anyone taking out a loan of more than Rs 30 lakh would not be able to claim a deduction for the total interest paid in the first few years. This is because interest rate deductions are capped at Rs 2 lakh per year under section 24(b) of the Act. “The Rs 2 lakh tax deduction on housing loan interest rates has to be increased to at least Rs 5 lakh – this might kick-start healthy demand for homes, especially in the inexpensive and mid-segment categories,” Puri adds.
Shori echoes the thought. “The government should increase the home loan interest deduction cap of Rs 2 lakh under section 24 (b) in the upcoming budget as it will provide a much-needed relief to homebuyers who have been struggling in the face of substantial increase in prices of essential commodities. To reduce the financial burden of taxes, the interest cap should be extended to Rs 5 lakh so that more homebuyers can look up to the dream of owning a home,” she says.
Source: moneycontrol.com
