Additional tax benefit of Rs 1.5 lakhs for affordable home buyers


Finance minister Nirmala Sitharaman, while presenting the Union Budget 2019-20, has proposed an additional tax deduction of Rs 1.50 lakhs on the interest paid on home loans for affordable housing

Update on July 5, 2019: Finance minister Nirmala Sitharaman, while presenting the Union Budget 2019-20, on July 5, 2019, said the government is proposing additional tax deduction of Rs 1.50 lakhs on the interest paid on home loans taken up to March 31, 2020.

In terms of corporate taxes, Sitharaman also proposed that 25% corporate tax will apply on companies with up to Rs 400 crores turnover and this would cover 99.3 pc of corporate India. The government aims to simplify tax administration and bring transparency, she added.

Read the important highlights of Union Budget 2019 here.


Update on February 1, 2019: 

Tax exemptions proposed in Interim Budget 2019

  • As a once in a lifetime benefit, the of rollover of capital tax gains is proposed to be increased from investment in one residential house to that in two residential houses, for a tax payer having capital gains of up to Rs 2 crores.
  • Exemption on notional rent on unsold inventory increased from 1 to 2 years – i.e., notional rent wil lbe levied only after 2 years.
  • Affordable housing – Section 80IBA – benefits extended by another year if registered by 2020.
  • TDS exemption on rental income increased from Rs 1.8 lakhs to Rs 2.40 lakhs.
  • TDS threshold on interest earned from banks, FDs, etc. – raised from Rs 10,000 to Rs 40,000.
  • Notional rent to be exempt on second self-occupied house.
  • Standard deduction raised from Rs 40,000 to Rs 50,000 for salaried classs.
  • Individual tax payers with annual income of up to Rs 5 lakhs to get full tax rebate. Those with gross income of Rs 6.5 lakhs may not be required to pay tax, if they do investments in specified savings like VPF, etc.

Aashish Agarwal

Head – consulting services at Colliers International India

With exemption on notional rent for self-occupied second homes, the Government has addressed a significant pain point for the middle class, particularly migrants with dependant parents. Along with capital gains exemption for up to two houses, this will allow people to have a diversified portfolio for real estate investment – which will spur demand across the country, including Tier 2 and Tier 3 cities.

Joe Verghese

Managing Director (south), Colliers International India

Review of “GST impact on homebuyers” by group of ministers is a positive step, but it is disappointing to note there is no timeline around the changes to be introduced and implemented. It’s will be a wait and watch on this front unfortunately.

A home loan is a crucial enabler for first-time home buyers, especially in India, where a large portion of the population do not have their own homes. The government, hence, needs to look into the requirements of home loan borrowers, especially if it wants to achieve its stated objective of providing ‘Housing for All by 2022’. Understandably, home buyers have high expectations from the interim budget 2019.


What do home loan borrowers need from budget 2019?

February 1, 2019: With the interim budget 2019 set to be announced prior to the general elections, we look at some of the sops that the finance minister can announce, vis-à-vis housing loans, to woo the home buyer segment

What does the middle-class property buyer need, from the interim budget?

Anuj Puri, chairman of ANAROCK Property Consultants, suggests that in order to woo middle-class tax payers (who live in perpetual hope of further relief), the government could offer the following tax benefits:

  • “Reduction in income tax slabs and/or
  • Higher relief on housing loan rates and/or
  • Increase in the deduction limit under Section 80C, from the current amount of Rs 1.5 lakhs a year.”

The exemption limit under Section 80C was last raised in 2014, after a decade-long hiatus and this raises expectations that this route may be revisited in this budget, Puri adds.

Ronak Patel, a self-employed professional from Vadodara, says, “The government should increase the income tax slab from Rs 2.5 lakhs to Rs five lakhs. It is time for the tax slabs to be linked to the inflation rate, so that every year, the common people get tax relief to the extent of increase in the cost of living. This will also help home loan borrowers to repay the loan on time, without compromising on their lifestyle.”

See also: Budget 2019 highlights: What did home buyers and the real estate sector gain

Expectations, vis-à-vis home loans from the interim budget 2019

At present, home loan borrowers get the deduction benefit under Section 80C of up to Rs 1.5 lakhs in a financial year, which includes principal repayment. The buyer also gets a deduction benefit of up to Rs two lakhs in a financial year under Section 24 against interest payment on the home loan. However, these tax sops are seldom sufficient for home loan borrowers. In the major cities, buying a home by availing of a loan, can be less attractive, in comparison to living in a rented home.

Farshid Cooper, managing director at Spenta Corporation, maintains that “The cap on deductions available to home buyers, on interest paid for the residential property, should be increased from Rs two lakhs to Rs four lakhs or more, thereby, encouraging home buyers to invest in real estate. Also, to address the issue of affordability, stamp duty should be included in the purview of GST.”

Rationalisation of taxes on the purchase of property

Experts point out that the idea of introducing the Goods and Services Tax (GST), was to eliminate multiple taxation. However, in addition to GST on under-construction properties, home buyers are still forced to pay other taxes like stamp duty, which should, ideally, be subsumed within the GST. Arvind Hali, CEO and MD of ART Housing Finance says that the government should focus on some of the long-standing demands of home buyers, such as:

  • “Rationalisation of high registration costs.
  • Standardisation of property registration cost and processes, across India.
  • Introduction of tax sops on an eco-friendly properties and home loans associated with the same.
  • Incremental sops on priority sector housing loans under Section 24 and 80C.
  • Extension of the credit-linked subsidy scheme for the MIG-1 and MIG-2 segments, up to FY2022.
  • Increasing the overall limit of tax deduction on housing loans.”

Besides this, home buyers are also expecting the government to make announcements aimed at improving infrastructure, such as roads, metro rail connectivity and clean water and drainage systems.

Expectation of home buyers from budget 2019

  • Increase in tax relief under Section 80C and Section 24.
  • Augmenting infrastructure.
  • Bringing stamp duty on property purchase under the purview of GST.
  • New tax benefits for first-time home buyers.
  • Standardisation of property registration cost and processes, across India.

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