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Tax incentive for home loan principal repayment must be hiked
February, 11th 2016

Building a house is one of the major accomplishments in the life of every individual. With affordability traversing in most of the cities, the hopes of the home buyers are revolving around getting tax incentives and deductions from this Union Budget 2016, which can ease some of their burden. A few of the common expectations among home buyers from this budget are as follows:

Currently, any pre-construction interest is allowed for deduction only if the project gets completed within 3 years of starting of the construction. After getting possession, one can claim the deduction within five years from possession in equal installments under Section 24B. The buyers are looking for applicability of the deduction on account of interest payment available under section 24, from the year in which capital was borrowed.

The interest on home loan should be allowed for deduction to the extent of full interest paid at least in respect of one house. Currently, a 100% deduction on home loan interest for rented houses is available while owner occupied houses are eligible for only INR 2.0 lakh deduction under 80C. This rule should be rationalised and deduction available should be 100% of interest for both rented, as well as owner occupied houses.

Home buyers are looking for an extra incentive for home loan principal repayment, which is currently included in the rebates under section 80C of income tax. The exclusion of principal repayments on home loans from benefits under Section 80 C is what home buyers are looking for.

Rental housing is one of the key areas that can boost housing demand in the country. There has been a lot of talk also to promote rental housing. However, currently rental income is treated as other income for income tax calculations and it gets same tax treatment as per individual tax brackets. Reduction in the tax bracket for rental income will improve the yield in the hand of the owner and will boost rental housing in the country.

Currently, under section 24(a) 30% of the annual value can be claimed as deduction for repairs, maintenance and insurance, etc. this is irrespective of the actual incurred expenditure. The buyers are looking to increase the deduction under this head to the extent of 50%.

Beside all these expectations, all the residential real estate buyers are looking for is the enactment of the Real Estate Regulation Bill. The hopes are high that the bill will bring much needed relief to the home buyers by making the sector more transparent and accountable. Another expectation being the increase in disposable income in the hand of individual taxpayers, which all of us are looking for. With Union Budget 2016 going to get announced by end of this month, let us hope for the best for homebuyers who are sitting on the fence and waiting for some positive news to realise their dream of home ownership.

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