Budget 2019: Will your home loan finally become cheaper?

With Interim Finance Minister Piyush Goyal scheduled to announce Budget 2019 on Friday, home buyers will be looking at some relief in terms of interest paid on home loan. Among other crucial decisions that Goyal could dole out for the middle class, affordable housing is the most important considering that housing remains the top priority for all Indians. Experts also believe that there is a need to restore the faith of the homebuyers affected due to high EMIs and lack of deliveries. So the question is: will you home loan finally become cheaper? The chances are yes, they could become cheaper.

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There has been increase in demand for affordable housing, and the BJP government could try everything possible to appease its biggest vote bank. Given the rise in the cost of borrowing of a property and surge in property prices, the current deduction limit of interest paid on home loan by home buyers (i.e. Rs 2 lakh a year) is too low to cover the amount of interest paid. Hence, the government could consider increasing this limit from Rs 2 lakh to atleast Rs 3 lakh, if not to Rs 5 lakh in the Union Budget so that the deduction is justified. This will see the taxable income of home buyers coming down.

Similarly, with respect to let out property, the current limit for set-off of house property loss against other heads of income in the same year, should be enhanced from Rs 2 lakh to Rs 3 lakh.

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The wish lists of the common man and industry bodies have one thing in common: demand for an increase in the maximum deduction limit under Section 80C. The logic is that that the hike of Rs 50,000 granted in Budget 2014, which increased the tax exemption limit from Rs 1 lakh to Rs 1.5 lakh, hardly provides any relief in the face of rising cost of living and inflation.

The current 80C limit quickly gets exhausted through expenses like tuition fees, provident fund contributions and payments made against home loan principal. An increase in the tax exemption limit would provide little more room to cover these expenses. Also, people will be able to save through permissible investments such as five-year notified tax-saving bank deposits, Public Provident Fund (PPF), National Savings Certificate (NSC), equity-linked savings schemes (ELSS), subscription to notified securities and deposits schemes, and more.  An increase in this limit will, hence, also allow individuals to channelise long-term savings into capital markets.

Edited by Manoj Sharma

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