Government is contemplating to enhance income tax exemption for up to Rs 3 lakh paid as interest on housing loans in a year, from the existing limit of Rs 1.5 lakh. The Budget is scheduled to be tabled on March 16.
At present, a deduction of up to Rs 1.5 lakh is available from taxable income towards interest on loan taken for a house. Besides, borrowers can enjoy exemption on payment of principal amount. However, it is part of exemption to savings capped at Rs 1 lakh per annum.
“We recommended that the existing tax deduction limit on income tax of an individual should be increased from the current level of Rs 2.5 lakh to at least Rs 5 lakh,” said CII Director-General Chandrajit Banerjee.
Of this, Rs 3 lakh should be towards interest payment to offset the impact of high interest rates, he said, adding the remaining Rs 2 lakh should be exclusively towards principal loan repayment as the present limit of Rs 1 lakh is already overcrowded with several other items.
As per the Direct Taxes Code, which would replace the decades-old Income Tax Act, there is income tax exemption for up to Rs 1.5 lakh paid as interest on housing loans in a year.