Finance minister Pranab Mukherjee may have some good news for home-loan borrowers in the 2012-13 budget. The government is considering a proposal to double the tax deduction limit on interest on home loans to Rs. 3 lakh per annum. "It is important to align the tax deduction on housing loans with rising interest rates,” said an official.
 
If the proposal is implemented, individual borrowers will have extra disposable incomes of anything between Rs. 15,000 and Rs. 45,000 a year.

A hike in tax deduction on interest paid on housing loans along with a probable rejig in tax slabs will enhance people’s disposable income, which, in turn will boost consumption spending as well as savings.

"It could get significant tax benefits to the individuals and would also propel them to look at investing in a residential property, which will boost the realty sector and leave people with larger disposable incomes,” said Rajesh Srinivasan, senior director at consulting firm Deloitte.

The government is negotiating a maze of thorny issues ahead of the budget amid faltering demand and rising prices that have hit growth.