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Budget Insights

Union Budget 2022 Tax Benefit on Home Loan

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Deepshikha Nainani

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While the last couple of years have been challenging for all industries globally, the real estate and construction sectors have been hit harder than most other sectors. However, not all is bad news. The recent few months have witnessed a strong resurgence, especially in the residential real estate market. This comeback requires more impetus for the industry to reach pre-pandemic levels. For this to happen, the sector has been seeking a helping hand from the government via the Union Budget 2022 or through interim amendments in the form of tax sops, reduced loan rates, redefinition of LTCG, and other such reforms.

Some of these transformations are already in motion. For example, home loan rates across almost all banks have been cut to encourage new buyers. There have been similar reductions in registration and stamp duties. But, if the pace of the recovery is accelerated, more is needed.

Current Situation

One of the key questions here has been regarding the home loan principal's tax benefits and interest rate. Presently, under Section 80 C Income Tax Act, repayment of a home loan principal can be claimed up to a limit of Rs. 1.5 L per annum. While this sounds beneficial, one must remember that Sec 80 C is already a heavily loaded basket. It also includes insurance, pension plan, tax-saving funds, ELSS, ULIP, PF, etc. All of these have a combined total limit of Rs. 1.5 L. Section 24 B of the same act provides a deduction of up to Rs for the home loan interest. 2.5 L each year.

Desired Support

One of the key demands by the real estate sector is to increase the already cluttered Sec 80 C kitty or introduce a separate section specifically aimed at providing deductions for the home loan principal repayment. Similarly, there have been repeated requests for increasing the cap of Rs. 2 L to Rs. 5 L for Sec 24 that provides tax benefits for repayment of the loan interest amount. This is expected to attract many service professionals into buying homes.

Another budget 2022 expectation of encouraging the middle-class buyer has been to change the current definition of ‘affordable housing’ and change the ceiling price from Rs. 45 L to Rs 75 L (and higher for metro cities). Since tax and loan benefits are already in place for the affordable housing program, such as the PMAY scheme, redefining its terms and conditions can attract a whole new segment of buyers for the already constructed and under-construction dwellings.

Small home buyers need incentivisation as well. Here, it is requested that the government offer benefits via reducing the stamp duty and other registration-related charges to reduce the overhead expenses involved in buying a home.

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Hi! I’m Deepshikha Nainani
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Deepshikha is a marketing and communications expert with over a decade of experience across various industries. With expertise in performance content, digital campaigns and brand management, she excels in creating data-driven, creative solutions that drive growth and engagement. Holding certifications in digital marketing and content strategy, she is passionate about combining creativity with analytics to create compelling marketing narratives that resonate. During her downtime, Deepshikha enjoys watching films and documentaries, listening to music, cooking and traveling.

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