Budget 2023: Homebuyers may expect higher tax benefits
Increasing deduction limits is one of the key agenda of real estate developers this season.
- Jan 9, 2023,
- Updated Jan 11, 2023 2:06 PM IST
With the country’s real estate developers and other industry stakeholders demanding increase in deduction limits, homebuyers may expect greater relief from the upcoming Union Budget.
The last such revision came into effect in 2014, when Rs 1.5 lakh per annum deduction was allowed under Section 80C of the Income Tax Act on the principal amount of an home loan. But as home prices have begun to rise due to steadily surging inflation, industry stakeholders have appealed to the Finance Minister Nirmala Sitharaman to raise the deduction limit on principal amount to Rs 4 lakh per annum.
“The limit of principal deduction on housing loans under Section 80C of the Income Tax Act (IT Act) 1961 stands at Rs 1.5 lakh per annum. It is recommended that this be increased to at least Rs 4 lakh per annum. This tax deduction can also be entirely moved out of section 80C since it gets clubbed with other instruments such as LIC, PPF, etc.,” said Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE.
According to Shishir Baijal, Chairman & Managing Director of Knight Frank India the move “will improve housing affordability and provide the much-needed fillip to opt for home loans. Even investors have numerous investment alternatives to choose from and the lack of exclusive tax benefit on the principal amount of home loans makes them indifferent towards a house purchase,” he added.
Moreover, industry experts are seeking raising the deduction limit on home loan interest from the current levels of Rs 2 lakh per annum. These come at a time, when home prices continue to soar for the past one year. As per estimates by JLL India, prices of homes across top seven cities have surged by 10 to 31 per cent between November, 2019 and November 2022 as cost of construction grew by 32 per cent. Further, with the Reserve Bank of India raising lending rates average home loan rates have surged by 2.25 percentage points between May and December. As a result, JLL said in a recent report, homebuyers’ affordability has been hit as their EMI (equated monthly instalment) to income ratio has begun to surge after three years.
“There is an express need for more tax sops for homebuyers as well as investors. The Rs 2 lakh tax rebate on housing loan interest under Section 24 of the Income Tax Act needs to be hiked to at least Rs 5 lakh. This will add momentum to housing demand, particularly in the affordable segment,” said Anuj Puri, Chairman, Anarock Group.
With the country’s real estate developers and other industry stakeholders demanding increase in deduction limits, homebuyers may expect greater relief from the upcoming Union Budget.
The last such revision came into effect in 2014, when Rs 1.5 lakh per annum deduction was allowed under Section 80C of the Income Tax Act on the principal amount of an home loan. But as home prices have begun to rise due to steadily surging inflation, industry stakeholders have appealed to the Finance Minister Nirmala Sitharaman to raise the deduction limit on principal amount to Rs 4 lakh per annum.
“The limit of principal deduction on housing loans under Section 80C of the Income Tax Act (IT Act) 1961 stands at Rs 1.5 lakh per annum. It is recommended that this be increased to at least Rs 4 lakh per annum. This tax deduction can also be entirely moved out of section 80C since it gets clubbed with other instruments such as LIC, PPF, etc.,” said Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE.
According to Shishir Baijal, Chairman & Managing Director of Knight Frank India the move “will improve housing affordability and provide the much-needed fillip to opt for home loans. Even investors have numerous investment alternatives to choose from and the lack of exclusive tax benefit on the principal amount of home loans makes them indifferent towards a house purchase,” he added.
Moreover, industry experts are seeking raising the deduction limit on home loan interest from the current levels of Rs 2 lakh per annum. These come at a time, when home prices continue to soar for the past one year. As per estimates by JLL India, prices of homes across top seven cities have surged by 10 to 31 per cent between November, 2019 and November 2022 as cost of construction grew by 32 per cent. Further, with the Reserve Bank of India raising lending rates average home loan rates have surged by 2.25 percentage points between May and December. As a result, JLL said in a recent report, homebuyers’ affordability has been hit as their EMI (equated monthly instalment) to income ratio has begun to surge after three years.
“There is an express need for more tax sops for homebuyers as well as investors. The Rs 2 lakh tax rebate on housing loan interest under Section 24 of the Income Tax Act needs to be hiked to at least Rs 5 lakh. This will add momentum to housing demand, particularly in the affordable segment,” said Anuj Puri, Chairman, Anarock Group.