Union budget: Centre likely to raise home loan exemption

  • Mahua Venkatesh, Hindustan Times, New Delhi
  • Updated: Jan 29, 2015 17:16 IST

The government may raise the tax exemption limit on home loan interest by Rs. 50,000 this year, in what will help thousands of families save more money.

Finance minister Arun Jaitley is planning to up the present cap of Rs.2 lakh to Rs.2.5 lakh in the 2015-16 budget to be announced late next month. If the proposal is implemented, an individual with an outstanding 20-year home loan of Rs. 50 lakh will be left with an additional Rs.15,000 a year approximately.

“It is important to align the tax deduction on housing loans with interest rates,” a government source who did not wish to be identified told Hindustan Times.

The increase, the government hopes, will set off a cascading effect that helps create more jobs in the construction sector by catalysing the realty market.

“This year, the exemption limit on housing loan could be further increased, a move that would encourage people to buy houses and even give a boost to the credit demand… (which) has been weak… but steps are being taken to ensure that credit growth picks up in the next financial year,” the source added.

Last year, Jaitley had raised the tax deduction against interest payment on home loan to Rs.2,00,000 from Rs.1,50,000.

The issue, the source said, was also raised in the pre-budget meeting that Jaitley held with the bankers.

“The issue was also brought up by bankers…they pointed out that the exemptions be increased,” the source added.

A hike in tax deduction on housing loans interest along with a probable rise in the annual overall exemption limit will enhance people’s disposable income, which, in turn will boost spending as well as savings.

The move, besides giving relief to the salaried class, will also help in enhancing household savings.


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