Union Budget 2024-25: Six demands that top home loan borrowers’ wish list

The primary expectation is that the tax benefit on home loan interest under Section 24 of the I-T Act is enhanced from Rs 2 lakh to Rs 5 lakh in the budget.

“Given that the cost of credit is at a high and properties even in Tier 3 and 4 cities have become so much more expensive, this rationalisation is essential,” says Adhil Shetty, CEO, BankBazaar.com.

“This aims to boost housing demand, particularly for budget homes, which have seen a decline in sales since the pandemic,” adds Atul Monga, CEO and Co-Founder, Basic Home Loan, a fintech lending company.

According to Nitesh Buddhadev, Founder, Nimit Consultancy, the tax break of Rs 2 lakh under Section 24(b) on home loan interest is inadequate, considering the price of a house and loan amount required to make the purchase.

For instance, let us take the case of a borrower with a Rs 1-crore home loan carrying an interest rate of 8.5 percent and tenure of 20 years. The EMI in this case will work out to Rs 87,000 per month and the interest portion for the initial three years will be in the region of Rs 8.05 lakh to Rs 8.42 lakh per annum. Therefore, an enhancement in the tax relief on home loan interest payable is long overdue.

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Separate section for home loan principal repayment

At present, the home loan principal is part of Section 80C deductions. Under this section, an individual is entitled to tax deductions on the amount paid as repayment of the principal component of the housing loan.

An amount of up to Rs 1.5 lakh can be claimed as tax deduction under Section 80C, which is already saturated with several other tax sops. Therefore, some financial experts and housing finance companies feel that there is a need to create a separate section for home loan principal repayment, with a tax deduction limit of up to Rs 3 lakh.

Also read | Budget 2024-25: Standard deduction for salaried individuals may increase to Rs 1 lakh

Home loan interest benefit under new tax regime

Financial year 2023-24 saw significant changes in the new tax regime. For instance, the tax rebate limit was raised from Rs 5 lakh to Rs 7 lakh under the new regime, while the number of I-T slabs under the new regime were brought down from six to five.

The basic exemption limit was hiked from Rs 2.5 lakh to Rs 3 lakh, while standard deduction of Rs 50,000 for salaried individuals and pensioners was introduced in the new I-T regime.

“To continue making the new tax regime more attractive for taxpayers, this year, in the Union Budget, the finance minister must introduce tax deduction on home loan interest for first-time homebuyers who intend to live in the house (self-occupied property),” says Buddhadev.

Boost to affordable housing

There is also a call to adjust the qualifying cost of affordable properties, especially in expensive cities like Mumbai, where the current limit of Rs 45 lakh is considered insufficient. “Currently, interest subsidies under the Pradhan Mantri Awas Yojana (PMAY) are available for homes costing up to Rs 45 lakh, but there are demands to raise this limit to Rs 65 lakh to reflect rising property prices,” says Monga.

Also read | Budget 2024-25: Crypto firms call for tax reductions, regulatory clarity

Reinstate credit-linked subsidy scheme 

The Credit-Linked Subsidy Scheme (CLSS) was valid up to March 31, 2022. Under CLSS, beneficiaries of the economically weaker section (EWS), the low-income group (LIG) and middle-income group (MIG) were able to seek housing loans from banks and other financial institutions at subsidised rates of interest.

“To incentivise homebuyers, CLSS should be reinstated in Union Budget 2024, as it has been beneficial to several home loan borrowers in the affordable housing category,” says Amit Diwan, Chief Distribution Officer, India Mortgage Guarantee Corporation (IMGC).

Also read | Budget 2024: Will government offer capital gains tax relief to investors?

Reintroduction of Section 80EEA

Section 80EEA offered first-time homebuyers a deduction of up to Rs 50,000 on the interest paid on home loan. This was discontinued after March 2022.

“Reinstating this deduction would reduce the cost of ownership for individuals looking to purchase their first home and advance the government’s objective of ensuring accessible housing for everyone,” says Shetty.