Tax benefits, higher limits expected as govt tries to revive economy

  • Mahua Venkatesh, Hindustan Times, New Delhi
  • Updated: Feb 02, 2015 23:27 IST

The finance ministry is working out ways to spare consumers with extra cash in their hands so that it will help revive the economy’s growth by giving a fillip to sagging credit demand.

According to sources, several discussions have been held within the ministry to examine possible ways of achieving this.

“We want people to be left with more money in their hands so that it can in turn be spent, and that is how there will be credit demand too. This will be important to revive growth,” said a senior government official.

One of the ways is to raise the tax deduction limit on interest on home loans by Rs 50,000 to Rs 2.5 lakh annually from the current Rs2 lakh a year. If the proposal sees the light of day, an individual who has to pay equated monthly instalments (EMI) on a home loan would be left with a larger chunk of disposable income in his/her hands.

Sources said that there could be a few more methods of similar kind where consumers get “some” tax benefits to provide a thrust to certain sectors and the overall economy.

Earlier, finance minister Arun Jaitley too highlighted several times that he advocated maintaining lower taxes. “I am not in favour of raising the rates of taxation as that could become counter-productive,” he said at the World Economic Forum at Davos in Switzerland.

Lenders have also brought up the issue of tepid credit demand with the finance ministry. Banks have been asked to analyse the reasons for low credit demand, and ways to reverse the trend.

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