Bangalore Property

Bangalore: In order to give the slowdown hit Real estate sector a boost, the government of India is considering a proposal to hike income-tax exemption for interest payment on home loans to Rs 2.5 lakh a year. A government official said that the Ministry of Housing and Urban Development has urged Finance Minister Pranab Mukherjee to make this announcement in his Budget next month. So far, people who are taking housing loans are eligible for incom e-tax exemption on interest payment of up to Rs 1.5 lakh every year.

The repayment of principal amount is part of investments eligible for benefit under Section 80(C) of the Income-Tax Act, which has a ceiling of Rs 1 lakh. If the government decides to hike the exemption limit to Rs 2.5 lakh, then a person will be able to save an. Rs 31,000 in tax every year. This will make home purchases more affordable as saving of over Rs 2,500 a month would be significant for most borrowers. President Pratibha Patil has already highlighted housing as one of the area where government will focus.

According to the current rules, the tax benefits start only after the construction of the house is completed. This usually takes 2-3 years in case of builder flats. The housing industry has urged the government to allow for the deduction as soon as loan repayment starts, as this would help home buyers and boost demand. The housing sector in the country is in need of such boost as it has been hit hard by demand slowdown, following a rise in interest rates. The industry has been continuously pitching for greater tax benefit, as this will create demand in market.