Ahead of the presentation of Union Budget 2020, the Confederation of Indian Industry (CII) has called for enhancing the limit on interest deduction on loan taken for the purchase of house property to Rs 5 lakh. In its Pre-Budget Memorandum, the industry body has said that the current limit at Rs 2 lakh is not in harmony with the interest burden borne by taxpayers given the substantial increase in prices. Finance Minister Nirmala Sitharaman will present the Union Budget for financial year 2020-21 on February 1.
India's real estate sector has been struggling against a severe liquidity crunch over the past three years following a series of debt defaults by high profile non-banking finance companies. A slump in the residential property market is leaving many builders struggling to repay loans to NBFCs.
The maximum deduction on interest payment of home loan taken for the property is currently capped at Rs 200,000.
Enhancing the limit to Rs 5 lakh will boost the real estate sector and incentivize the income tax assessees, according to the Confederation of Indian Industry.
"The quantum of set-off of losses from house property (self-occupied/rented) against other heads of income should be increased from Rs lakh to Rs 5 lakh," the industry body further said in its Pre-Budget Memorandum, released ahead of the presentation of Union Budget 2020 in Parliament.
In the Union Budget 2019, the government introduced income tax benefits on interest payments on affordable housing loans. It increased the interest deduction available on home loans taken by March 31, 2020 for houses valued up to Rs 45 lakh by Rs 1.5 lakh, making the total deductions to Rs 3.5 lakh per annum.