Planning to buy a home? Here‘s what to expect from Budget 2017

Archit GuptaClearTaxPost demonetisation realty prices have taken a hit. Prospective buyers though are waiting for Budget 2017 and home loan interest rates to soften. It is important to understand the existing tax benefits and what one should expect from the budget before making the big investment decision of buying a house.Current tax benefits - Those who take a home loan can claim a deduction of Rs 2 lakh annually on the interest they pay. If the house is on rent, the entire interest can be claimed as a deduction. Principal repayments are also eligible for deduction under section 80C. Stamp duty paid and registration charges can be claimed within the overall limit specified under section 80C. First time home buyers who buy a property of Rs 50 lakh or less with a home loan of Rs 35 lakhs or less, can avail an additional deduction of Rs 50,000 in a financial year as per section 80EE. Besides these benefits, in the last budget the government had announced increase in time limit for completion of construction from 3 years to 5 years. Expected benefits – The PM has already announced changes to the PM Awas Yojana to facilitate home ownership amongst the economically weaker sections of the society. Interest subsidies & higher eligibility for loans have been proposed. Income tax department data reveals that of the total returns filed for AY 2014-15, 2.6 lakh returns reported a loss under house property. A loss from house property is reported when interest deduction is claimed. Roughly Rs 1,525 crores was claimed as loss from house property income in tax returns for AY 2014-15. This loss is allowed to be claimed from income earned from other heads i.e. a loss of revenue to the government. By increasing the interest deduction limit from Rs 2 lakh to Rs 3 lakh, the government will not see a major hit to its tax collections. This will give essential boost to the realty sector, which will lead to a positive effect on the overall economy, increased spending and raising consumption. The impact on revenue is likely to smaller when compared to the benefits. Besides, this will help the government push its social agenda.In situations where loan has been taken for construction linked property, deduction for interest can only be claimed if construction has been completed within the time limit prescribed. In the last year’s budget the government raised the time limit allowed for completion of construction from 3 years to 5 years. However, buyers continue to suffer at the hands of builders. Builders delay projects and cause undue hardship and loss of tax benefits to home buyers. The government should completely do away with this time limit for first time home owners. This will make sure they are not devoid of tax benefits for fault of the builder. While this sector may have been hit due to demonetisation, India’s massive demand for housing can be a harbinger of growth and development. The government has recognised some of the problems of this sector and has brought the real estate act in force. Now it just need to follow it through some smart tax moves.