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An individual who is liable to pay income tax is presently granted a deduction of up to Rs. 1.5 lakh from the salary income for the interest paid on Housing Loan taken for self occupied housing property in an assessment year.
As per media reports on expected changes in Income tax regulations in the ensuing budget 2012, the present limit of Rs. 1.5 lakh for housing loan interest may be raised to Rs. 3 lakhs.
The Economic Times reports as follows
In a bid to boost housing sector credit, the government is contemplating to enhance income tax exemption for up to Rs 3 lakh paid as interest on housing loans in a year, from the existing limit of Rs 1.5 lakh.
The government is considering to raise the tax deduction limit for housing loan in the coming Budget, sources said The Budget is scheduled to be tabled on March 16. At present, a deduction of up to Rs 1.5 lakh is available from taxable income towards interest on loan taken for house. Besides, borrowers can enjoy exemption on payment of principal amount. However, it is part of exemption to savings capped at Rs 1 lakh per annum.
With the property prices and interest rates rising with each passing year, there is need to revise the limit, sources said.
In order to arrest the declining growth rate, the industry associations have demanded raising the tax limit ceiling for the housing loan.
According to Ficci Secretary General Rajiv Kumar the exemption should be harmonised with the rising interest rates and increased to at least Rs 2.5 lakh.
“We recommended that the existing tax deduction limit on income tax of an individual should be increased from the current level of Rs 2.5 lakh to at least Rs 5 lakh,” CII Director General Chandrajit Banerjee.
Of this, Rs 3 lakh should be towards interest payment to offset the impact of high interest rates, he said, adding the remaining Rs 2 lakh should be exclusively towards principal loan repayment as the present limit of Rs 1 lakh is already overcrowded with several other items.
Echoing views, Assocham and PHD chamber said that exemption limit need to be raised both for interest and principal.
As per the Direct Taxes Code, which would replace the decades old Income Tax Act, there is income tax exemption for up to Rs 1.5 lakh paid as interest on housing loans in a year.
Source: The Economic Times