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Budget 2024-25 Home Buyers Expectations: With the Union Budget 2024-25 approaching, home loan borrowers are hoping that Finance Minister Nirmala Sitharaman will consider their long-standing key demands regarding tax benefits. The Finance Minister is demanding increasing tax deduction on home loan interest under Section 24(B) of the Income Tax (IT) Act, reintroduction of Section 80EEA and tax benefits to promote affordable housing. The demand for tax relief is focused on rising property and loan costs.
Tax deduction on home loan interest increased
The primary expectation is that the Budget will increase the tax benefit on home loan interest under Section 24 of the IT Act from Rs. 2 lakh to Rs. 5 lakh. Experts say that the demand is justified, given that the cost of loans is very high and property has become more expensive in tier 3 and 4 cities. Assuming an interest rate of 8.5 per cent and a tenure of 20 years, a Rs. 1 crore home loan holder will pay Rs. 87,000 EMI and the interest portion for the first three years will be Rs. 8.05 lakh to Rs. 8.42 lakh per annum. Therefore, an increase in the tax relief payable on home loan interest will be beneficial in this case.
A separate section for home loan principal repayment
Currently, the principal of home loan is part of Section 80C deduction. Under this section, a person is entitled to a tax deduction on repayment of housing loan principal. Under Section 80C, an amount up to Rs. 1.5 lakh can be claimed as tax deduction. Therefore, some financial experts and housing finance companies believe that a separate section should be created for tax deduction limit of up to Rs. 3 lakh on payment of principal of home loan.
Home loan interest benefit under the new tax regime
The new tax regime is expected to see significant changes in the financial year 2023-24. For example, the tax exemption limit under the new regime has been increased from Rs. 5 lakh to Rs. 7 lakh, while the number of IT slabs under the new regime has been reduced from six to five. The basic exemption limit has been increased from Rs. 2.5 lakh to Rs. 3 lakh, while for salaried individuals and pensioners a standard deduction of Rs. 50,000 has been introduced in the new tax regime. To make the new tax regime more attractive to taxpayers, the Finance Minister in the Union Budget this year should introduce tax deduction on home loan interest for first-time homebuyers. Which will give a boost to the affordable housing scheme.
Re-introduction of Section 80EEA
In expensive cities like Mumbai where the current Rs. 45 lakh limit is being considered inadequate, there have been calls to adjust the qualifying cost of affordable property. Currently, interest subsidy under the Pradhan Mantri Awas Yojana (PMAY) is available for homes worth Rs. 45 lakh, but raising this limit to reflect rising property prices has been sought to Rs. 65 lakh.
Demand to restart credit linked subsidy scheme
The Credit-Linked Subsidy Scheme (CLSS) was valid till March 31, 2022. Under which beneficiaries of Economically Weaker Section (EWS), Low Income Group (LIG) and Middle Income Group (MIG) were getting housing loan facility from banks and other financial institutions at concessional interest rate. There has been a request to restart this facility. Section 80EEA allows first-time homebuyers to repay the interest paid on a home loan of Rs. Offered a deduction of up to 50,000. It was discontinued after March 2022.