The beleaguered real estate sector has seen some of the proposals in the last few budget which have yet gone through and to some extent helped in achieving the government's ambitious plan of housing for all by 2022.
Increase deduction for interest on housing loan: The demand to increase the deduction limit on interest payment on housing loan to Rs. 5 lakh from the current limit pegged at Rs. 2 lakh. The demand makes sense given the highest outgo in the initial years of housing loan repayment mostly is interest pay out. Also at the same time, there is expected an increase in limit for set off of loss, to reduce the burden on stressed home buyers.
Notably: Rs. 2 lakh deduction on interest payment is available in a case when there is no upper limit on the amount of interest that can be claimed as deduction for let-out house property. In the case of self occupied property, Rs. 2 lakh is inclusive of pre-construction interest, which can be claimed in five equal installments.
Increase in standard deduction: For computing the taxable income from house property one takes into account gross rental value minus taxes which gives the net rental value and from it a standard deduction of 30% is allowed against repairs and maintenance but this can be increased to as much as 50% given the inflation rate.