Finance minister Nirmala Sitharaman may increase the annual tax deduction limit on principal payment of housing loans under Section 80 C of the Income Tax Act. Currently, the limit is capped at Rs 1.5 lakh which can be raised to Rs 2 lakh in Budget 2023.
In a bid to boost housing demand and offer relief to taxpayers, the Centre may offer higher tax deductions on home loans in the upcoming budget, report said.
Finance Minister Nirmala Sitharaman may increase the annual tax deduction limit on principal payment of housing loans under Section 80 C of the Income Tax Act, Mint reported quoting two officials familiar with the development.
Currently, the limit is capped at Rs 1.5 lakh which can be raised to Rs 2 lakh in the Budget next month.
Recommending tax incentives on both the supply and demand sides for the real estate sector, property consultant Knight Frank India said the government could drive investor interest in housing by offering a separate annual tax deduction of Rs 150,000 for principal repayment, Moneycontrol reported. Without such incentives, consumers could be indifferent to house purchases, the property consultant said.
The government had last increased the deduction limit under Section 80C to Rs 1.5 lakh a year in 2014. An increase would give relief to taxpayers from the surge in expenses amid the pandemic and rising inflation, Sudhakar Sethuraman, a partner with Deloitte India, told Mint.
Taxpayers can also invest in other schemes like National Savings Schemes, Public Provident Fund, equity-linked saving scheme and ULIP to claim deductions under Section 80 C of the Income Tax Act.
The finance and housing ministries did not comment on the budget expectations.
Realtors also hope the government would raise the home-loan tax rebate under Section 24 from Rs 2 lakh to Rs 5 lakh. Such a move would instantly spur housing demand, especially in the affordable and mid-segment categories, Anuj Puri, chairman, Anarock Group, told Financial Express.
However, some experts feel the government is unlikely to offer tax sops as it introduced a new tax regime in the 2021 budget. The new tax regime offers lower tax rates but does not have deductions and only a few taxpayers have opted for it.
The government’s emphasis on the new tax regime may discourage it from expanding deductions in the old tax regime, Mint quoted Ved Jain, former president of the Institute of Chartered Accountants of India, as saying.
The real estate sector saw a strong comeback in 2021 as residential property sales reached over 90 percent of the pre-pandemic levels. The housing inventory overhang in top seven cities, which stood at 55 months by 2020-end, dropped to 32 months by 2021-end, Mint reported quoting data from Anarock.