Budget 2018: The Narendra Modi government should come up with measures in the upcoming budget 2018 to revive the housing sector which has plunged into a prolonged sluggishness, according to FICCI. “The deduction available under section 24 of the Act is to a maximum limit of Rs. 2,00,000/- for interest on loan taken for acquisition/construction of self-occupied house property. Given the rising interest rates and the increase in property prices and also to spur the demand for housing, it is recommended the exemption should be increased to at least Rs. 3,00,000/- per annum,” the industry body says. “Currently interest paid on home loan during the period of construction is allowed as a deduction in five yearly installments starting from the year in which the construction is completed and the taxpayer claims possession of the property. Often completion of construction of the property is delayed due to extraneous reasons not entirely within the control of the taxpayers. Many taxpayers have to pay interest on the home loan and additionally rent till the property is ready to occupy. This may leave many taxpayers with very little cash for other expenses, the industry body says.
FICCI has recommended that section 24 of the Act be amended to provide for a separate deduction so that the preconstruction interest is allowed in five installments without any threshold limit.
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Apart from this, FICCI said that “non-deductibility of housing loan interest paid in the respective years during the construction period also has another challenge. Maximum home loan interest which can be claimed as loss on self-occupied property is Rs. 200,000. Also, in respect of let out property, the loss cannot exceed Rs. 200,000 after deducting municipal taxes and standard deduction of thirty percent on the net amount.” “With the skyrocketing prices of the housing property, this threshold limit of Rs. 200,000 would often be insufficient even to cover the current year interest, leave alone one-fifth share of preconstruction interest,” the industry body says.
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FICCI has said, “an amendment is also required in sub-section 3A of section 71 of the Act to allow setoff of loss from house property in excess of Rs. 200,000 to the extent the excess amount represents pre-construction interest.”