Budget 2017: Expectations of home buyers

Here are some changes that the Home Buyers expect in this year’s Budget:

Hiking the cap on interest on home loan

The deduction available under section 24 of the Act is to a maximum limit of Rs 2,00,000/- for interest on loan taken for acquisition/construction of self-occupied house property. Given the rising interest rates and the increase in property prices and also to spur the demand for housing, it is recommended the exemption should be increased to at least Rs  3,00,000/- per annum.

Further, deduction in respect of interest on housing loan is allowed only after the possession of the property is handed over to the buyer and the interest payments for the construction period are allowed as deduction over a period of five years, starting from the previous year in which property is acquired or constructed. Therefore, the tax benefit is available to the taxpayer only after three to four years from the date the housing loan was raised by him despite regular interest payments embedded in EMI during the construction period.

To meet the housing need for all, it is desirable that the deduction towards interest on housing loan should be allowed in the previous year in which interest is paid by the taxpayer, irrespective of the year in which the property is acquired or constructed, provided that the house is not sold or transferred within a period of five years from the date of construction/acquisition.

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Payment of principal amount on home loan

In the case of home loan repayments, the ceiling under tax benefits is capped at Rs 1,50,000/- for principal paid, which is very less, particularly when home loan principal repayments are clubbed with other tax saving instruments.

Therefore, the deduction for principal repayment should be considered for a separate/standalone tax exemption, rather than being clubbed under Section 80C of the Act.

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Relaxation of tax benefits for first-time home buyers

Home buyers also felt that the additional tax incentive of Rs 50,000 for houses up to Rs 50 lakhs that was announced in the last budget, was not enough, especially in metros and recommend that the limit should be increased to houses worth Rs 1 crore. There is also a proposal to extend the tax benefits for a period of five years.

Last year,  first-time home buyers were given an additional tax deduction of  Rs 50,000 on interest payment (in addition to Rs 2,00,000) for house property worth up to Rs 50 lakh and with a loan amount up to Rs 35 lakh.