Income Tax News: Important Update! Home Loan Holders Eligible for ₹5 Lakh Exemption on Interest, Check Details

Income Tax News: The nation's general budget preparations are well underway. Even though this is only temporary, as always, we have high expectations for you. In order to draw voters, the government may also offer incentives like new programmes and tax breaks during election seasons.

High Hopes from Finance Minister

For this reason, the real estate industry also expects Nirmala Sitharaman, the Finance Minister, to soar. There has been a request for a house loan tax exemption. In addition to the general public, or taxpayers, the real estate industry is anticipated to gain greatly from this as well. The Confederation of Real Estate Developers Association of India (CREDAI) is advocating for an expansion of the tax exemption scope for home loans. Currently, there is a Rs 2 lakh cap on the amount exempt from house loan interest repayment. The amount ought to be raised to Rs 5 lakh.

CREDAI Highlights Challenges as Rates Remain High

According to CREDAI, interest rates are quite high. Reducing the repo rate until the second quarter of 2024 is a difficult task. The EMI for a house loan has been directly impacted by this. Monthly EMI payments for home purchases are greater. They stand to gain if they are granted a tax exemption in this scenario.

Once the principal amount of a home loan is paid off, an income tax deduction of up to Rs 1.5 lakh is available. Stamp duty and registration costs may also be included, although they can only be subtracted once per year from the total amount paid. Only new home construction or acquisition should be funded by home loans.

Understanding the Rs 2 Lakh Limit on House Loan Interest Payments

Up to Rs 2 lakh in tax exemptions are available for house loan interest payments. The residence for which the loan has been obtained, regardless of whether you now reside there or not. You won't, however, be eligible for the tax deduction if you rented that house.

Home Loan Tax Exemption Boosts Spending Power for Middle-Class Homeowners

Middle-class homeowners will have more money to spend if their home loans are exempt from taxes, and this will encourage others to purchase homes as well. "Demand is necessary for growth in the sector, and the demand will increase only when the taxpayers are given some benefit in tax exemption," says Manoj Gaur, Chairman of CREDAI.

The interest rates on house loans have been rising steadily as a result of the increase in repo rates. There has been a noticeable rise. It is unlikely that housing demand will rise even if they stay constant. Consequently, the government will only be able to exempt taxpayers. The industry can only pick up steam after that.

Understanding House Loan Payment Reductions Under Section 24

Tax reduction is offered on house loan payments under Section 24 of the Income Tax Act. EMI is divided into two sections. There are two parts: the primary part and the interest part. Section 24(b) allows for a tax exemption of up to Rs 2 lakh on the interest portion of a financial year. The major portion is eligible for the deduction under section 80C, with a cap of Rs 1.5 lakh.

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