Despite the low-interest rate on home loans, the demand for the house is not increasing, in such a situation this demand can be increased through tax benefit in the budget.
Union Budget 2021 Expectations for Home Buyers: When Finance Minister Nirmala Sitharaman presents the budget for the financial year 2021-22, it may also have announcements for the housing sector as the Modi government’s ambitious plan for urbanites ‘Deadline for Everyone (Housing for All)’ deadline year 2022 Has come close. The central government has taken several steps to increase the demand for real estate sector in the recent past, but the demand for houses did not show an increase as expected. The most important reason for the increase in demand for homes was that the interest rates of home loans fell below 7 percent for most people. In such a situation, it is expected that the government can make announcements in the Union Budget 2021 to increase the housing demand on its behalf.
According to Harsh D Chetanwala, co-founder of MyWealthdotcom, the demand for the house is not increasing even though the interest rate on the home loan is low, so this demand can be increased through the tax benefit in the budget. According to Chetanwala, in the budget for the next financial year 2021-22, the government can make a provision of benefit in the form of higher tax rebate on interest payments to new home buyers.
Prime Minister Housing Scheme
Finance Minister Nirmala Sitharaman has extended the deadline for buying houses under the MIG-1 and MIG-2 categories under the Pradhan Mantri Awas Yojana (PMAY) Credit-Linked Subsidy Scheme (CLSS). Now the deadline has been increased from 31 March 2020 to 31 March 2021 for the people who want to buy houses under PMAY CLSS. However the deadline is 31 March 2022 under LIG / EWS (Lower Income Group / Economic Vicar Section).
Under the PMAY CLSS scheme, people with an income of 6 lakh to 12 lakh get a house under MIG-1 (Middle Income Group-1) and get 4% interest subsidy on home loans up to Rs 9 lakh. Those with an income of 12 lakh to 18 lakh are placed in the MIG-2 category and they get an interest subsidy of 3 percent on home loans up to Rs 9 lakh. In this way, subsidy of Rs 2,35,068 in MIG-1 category and Rs 2,30,156 in MIG-2 category under PMAY CLSS scheme. It is now being hoped that in the Budget 2021 the government can give some more relief.
Additional tax benefit under section 80 EEA
For the first time, the government has increased the tax benefit on the home loan interest payment. Under Section 80 EEA, the buyer can avail deduction of up to Rs 1.5 lakh on payment of home loan interest under certain circumstances. To take advantage of this deduction, a condition is that loan should be sanctioned from April 1, 2019 to March 31, 2020. However, it has now been increased to 31 March 2021, that is, under Section 80 EEA, this benefit will be available on the loan made till 31 March 2021.
According to the stamp duty to take tax benefit under section 80 EEA, the price of the house should be less than Rs 45 lakh. According to Daylight India partner Aarti Raote, because of this provision most people are not able to take advantage of this exemption, in such a situation the government should increase the limit of 45 lakhs and remove the condition that the taxpayer does not have any other house. SEBI Registered Investment Advisor (RIA) and Col. Sanjeev Govilla (Retd), CEO of Hum Fauji, has demanded that the government change the definition of Affordable Housing to increase its limit from Rs 45 lakh to Rs 75 lakh.
Section 24 limit
Under Section 24 of the Income Tax Act, tax benefit is available on interest payments. According to BDO India Associate Partner – Tax and Regulatory Services Raghunathan Parthasarathy, at present, deduction of up to 2 lakh is available on the interest of housing loan of self-occupied property (ie living in the house itself). According to Parthasarathy, home buyers want the government to reduce the deduction limit to Rs 4 lakh annually.
Bad effect on rental income
The maximum limit for setting off any other income head (including ‘income from salary’) under the head ‘Income from house property’ was kept at Rs 2 lakh per annum. This loss can be carried forward for the next 8 years, although it can only be set off under the head ‘Income from house property’. This rule has affected thousands of taxpayers who have taken housing loans as per the earlier set of rules. Apart from this, rental income has decreased due to corona epidemic, there will be an increase in the loss of house property. According to Parthasarathy, the limit of deduction and the set-off of loss should be revised to 5 lakh.
Some senior investors invest in real estate properties so that it will continue to get rent. The Corona epidemic has severely affected this type of income. According to Aarti, financial problems are being faced by senior citizens due to fall in interest rates and reduction in income from rent. In such a situation, the government should prepare a mechanism for their medical, rental, telephone and electricity, etc. It should not be brought under the tax net.