(Image source from: Centre may raise Home loan exemption})

Finance Minister Arun Jaitley may increase tax exemption limit on home loan interest by Rs. 50,000 on present cap of Rs.2 lakh, which makes it Rs.2.5 lakh, in the 2015-16 budget to be announced late next month.

This proposal can ensure happiness in lacks of people. It will benefit, if an individual with an outstanding 20-year home loan of Rs. 50 lakh, will be left with an additional Rs.15,000 a year approximately.

It is important for the government to align the tax deduction on housing loans with interest rates. The government can expect that this idea will set off a cascading effect or turnover tax that helps create more jobs in the construction sector by strengthening the realty sector.

The increased exemption limit on housing loan will encourage the people to buy houses and even give a boost to the credit demand, which has been on weak direction. At the same time steps are to be taken for ensuring the credit growth in the next financial year.

In the last budget, Jaitley had raised the tax deduction against interest payment on home loan from Rs.1,50,000 to Rs.2,00,000.

A hike in tax deduction on housing loans interest along with a probable increase in the annual overall tax exemption limit will enhance people’s disposable income, which, positively help in increase spending as well as savings.

AW: Kannamsai