Home Loans May Get Tax Exemption on Interest Paid up to Rs.3 Lakh

With rise in property prices and interest rates, the government is considering raising the tax exemption limit on interest paid on home loans to up to Rs.3 lakh annually from the existing limit of Rs 1.5 lakh in the coming budget 2012, which is scheduled to be unveiled in Parliament on 16th March 2012.

The real estate industry associations, in order to curb the declining growth rate, have demanded for hiking the tax ceiling limit for the housing loan. If the proposal is accepted, the government will boost housing sector credit, keeping in view the rising cost of renting out accommodation for a common man. Also, this may lead to higher savings and/or consumer spending.

At present the deduction of up to Rs.1.5 lakh is available on taxable income on interest on home loan. But as per the report from various views, the exemption limit needs to be raised both for interest and principal. Moreover, it seems that Direct Tax Code (DTC) would replace the old Income Tax Act in the coming budget.