Tax Benefits on Home Loan Principal & Interest

With the commencement of the new financial year, millions of people have their eyes set on the Union Budget 2022. This year too, many homebuyers desire to see an increase in the limit of home loan tax benefits offered on principal and interest. In this article, let's know what is in store for the real estate sector in the Union Budget 2022-23.

In recent years, home loan rates have been relatively low. This is a favorable season for prospective homebuyers looking to invest in a new property as many banks, and financial institutions are offering home loans at attractive deals and affordable rates. The industry is awaiting big announcements that will revive the real estate sector and alter the industry's future. Here are some of the changes that may be announced in the new Union Budget 2022-23:

For a long time, there has been no increase in the tax concession on home loan principal However, this year, there may be an enhancement in the home loan principal tax benefit that will be addressed in the new Union Budget 2022-23. Experts believe a separate section needs to be introduced for deduction in home loan principal repayment. Since Section 80C covers many investments/expenses, including PF, PPF and life insurance policies, this leaves no scope for middle-class taxpayers to claim deduction on actual investment in a property.

The tax rebate of Rs.2 lakh on the housing loan interest under Section 24b is expected to be increased to at least Rs.5 lakh, which will create a good demand for housing, especially in the affordable to mid-segment category. The increase in housing loan interest deduction will also provide relief to homebuyers who are already paying higher prices for essential commodities.

Under Section 80EE and 80EEA, homebuyers can avail of additional tax deductions on home loan interest. The government offered home loan tax benefits to boost the affordable housing segment in India. However, due to parameters such as loan amount, maximum price, and loan size, many homebuyers cannot avail of the additional deductions as applicable.

Considering these constraints, experts believe that the government should reconsider the value of houses within the city-wise affordable housing budget. Suppose the government revises the prices, more homes will come under the affordable segment. This will allow buyers to avail multiple benefits such as government subsidies, lower GST rates at 1 percent without ITC and tax deduction of up to 3.5 lakh on home loan interest. This will encourage more home buyers and increase the demand in the real estate sector.

There may be a home loan tax exemption on the second home, which will benefit the homebuyers and stimulate the real estate sector. If there are any GST reforms, this will reduce the overall property cost and further enhance the demand for home buying. 

Source:

https://finance.thenewscaravan.com/budget-2022-tax-benefit-on-home-loan-principal-and-interest-should-increase-know-the-opinion-of-experts

https://www.moneycontrol.com/news/business/personal-finance/budget-2022-expectations-increase-tax-benefits-on-home-loan-principal-and-interest-7806811.html