Budget FY20 expectations: Tax exemption limit on home loan to be hiked to Rs 3 lakh? This is good news home buyers want
A full budget is all set to be presented, and many are expecting that the NDA government will start its second innings by announcing major tax benefits for the salaried class.
Will FM Nirmala Sitharaman announce income tax reforms on July, 5, 2019? if she does, it will be one of the most expected headlines on that day. A full budget is all set to be presented, and many are expecting that the NDA government will start its second innings by announcing major tax benefits for the salaried class. However, it may or may not happen. That said, even though one is liable to pay taxes on their income and income from other sources, the Income Tax department also allows taxpayers to reduce the tax payment burden through Income Tax Return (ITR) exemptions while filing. These tax exemptions are allowed on a host of investments, savings, loans and incomes.
It needs to be noted that, interim budget presented on February, 1, 2019, came with a bang, having proposals for exemption on levy of income tax on notional rent on a second self-occupied property. Also, increase in TDS threshold for deduction of tax on rent to Rs 2.4 lakh from previous Rs 1.8 lakh were some gamechangers for homebuyers.
However, now a new expectation has arisen and, if things work out well and FM Sitharaman actually ends up making an announcement, then this one is seen as being of big help for home loan borrowers.
Archit Gupta, Founder & CEO of ClearTax said, “The rate cut would benefit the real estate sector too with the lowering of the housing loan interest rates. The government could look at enhancing the deduction allowed towards interest paid on housing loan from the present limit of Rs 2 Lakh to Rs 3 Lakh considering the average price of a flat and ticket size of housing loans.”
Currently, according to Income Tax department, "Income from house property" in the case of a self occupied property will be either Nil (if there is no interest on housing loan) or negative (i.e., loss) to the extent of interest on housing loan. But, if you have taken housing loan, then under section 24(b) of IT Act, you can claim deductions. However, the amount must not exceed Rs 2 lakh or Rs 30,000.
If you have satisfied the following conditions, then limit in respect of interest on borrowed capital will be Rs 2 lakh.
1. Capital is borrowed on or after 1-4-1999.
2. Capital is borrowed for the purpose of acquisition or construction (i.e., not for repair, renewal, reconstruction).
3. Acquisition or construction is completed within 5 years from the end of the financial year in which the capital was borrowed.
4. The person extending the loan certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as re-finance of the principal amount outstanding under an earlier loan taken for acquisition or construction of the property.
If the above mentioned conditions are not fulfilled then, deduction limit will be reduced from Rs 2 lakh to Rs 30,000. Similarly, if you have taken loan from friends and relatives for purchase, construction, repaid, renewal or reconstruction, then you can also claim the above mentioned deductions.
Thereby, Gupta said, “As a tax policy initiative, the government could also consider aggregating the tax benefits for interest and principal repayment for house property under a single head thus concentrating the benefits of section 80C to investments.”