The government today proposed to retain the income tax exemption for up to Rs 1.5 lakh paid as interest on housing loans in a year, a step that brings cheers back to home loan borrowers.
The revised discussion paper on Direct Taxes Code (DTC), which would replace the decades old Income Tax Act, has retained the tax exemption for up to Rs 1.5 lakh paid as interest on housing loans. The revised draft is put up for public comments till June 30.
Earlier in the first draft of DTC, the government was silent on incentive given to interest paid on home loans, leading to widespread fears that this sop would be withdrawn.
The revised draft, however, is silent on exemption given on principal amount paid on housing loans. The first was also silent on this front.
At present, borrowers can enjoy exemption on payment of of principal amount. However, it is part of exemption to savings capped at Rs 1 lakh per annum. Interestingly, the 1st draft had proposed to revise this limit to Rs 3 lakh a year.
The revised draft said the overall limit of deduction for savings will be calibrated accordingly.
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"In case of any one house property, which has not been let out, an individual or HUF (Hindu Undivided Family) will be eligible for deduction on account of interest on capital borrowed for acquisition or construction of such house property (subject to a ceiling of Rs 1.5 lakh) from the gross total income," the revised draft said.
Reacting to the revised proposal, Vikas Vasal, KPMG India partner said, "Restoration of the deduction for interest paid for housing loan up to Rs 1.5 lakh is a welcome step."
Rajesh Srinivasan, Deloitte Tax Partner, said whether rebate on principal amount of hosuing loans is given or not will be known once the government comes out with details on Rs 3 lakh limit.