Special deduction on repayment of home loan principal
This is a long standing demand. The deduction limit under Section 80C is Rs 1.5 lakh. But the basket of investments and expenses covered under this deduction is full of about 10 items. One of them is home-loan principal repayment. In most cases, people meet the 80C limit with mandatory contributions towards EPF and children’s tuition fees. If there is some margin left, it will be filled by the premium of life insurance policies. Hence, deduction on home loan principal is unlikely.
Section 24B should be extended
Apart from repaying the principal, a borrower also has to pay interest on the home loan. Buying a home requires a large amount of money, so many lenders take out large home loans. As a result, a significant portion of their income goes towards paying the interest on the home loan. For many, the annual interest on the home loan is much higher than the upper limit of the deduction they can claim. The repo rate has increased by 2.25 percent this year. Due to this, the interest rate of home loans has increased significantly. As a result, customers will have to pay heavy interest. Hence, the demand of home buyers to increase the deduction limit for interest payments has risen.
Exemption from capital gains criterion
According to Section 54 of the Income Tax Act, long-term capital gain on sale of an existing house can be used to purchase or construct a new property. If the investment eligible for exemption is made through an under-construction property, it can be claimed only if the construction of the property is completed within three years of the sale of the earlier house.
Most importantly, the government should seriously rethink city-wise pricing of houses in the affordable housing budget. The size of the houses (60 square meter carpet area) is quite suitable as per its definition. But the cost of houses (up to Rs 45 lakh) is not feasible in most cities. For example, a city like Mumbai has a very low budget of less than Rs 45 lakh. It needs to be raised to Rs 85 lakh or more. For other leading cities, the budget should be increased from 60 lakhs to 65 lakhs.