Knight Frank has said that tax deduction on principal repayment of housing loans will lead to improvement in home buyer's affordability
Real estate consulting firm Knight Frank India has called for focused tax deduction on principal repayment of housing loans under Section 80 C of the Income Tax Act from the upcoming Union Budget 2023-24. Union Finance Minister Nirmala Sitharaman will present the Budget for upcoming financial year on February 1.
Knight Frank has said that tax deduction on principal repayment of housing loans will lead to improvement in home buyer's affordability.
"At present, Section 80 C of the Income Tax Act does not provide for a focused benefit on housing which is the largest and most important expense item for most taxpayers during their lifetimes. Even investors have numerous investment alternatives to choose from and the lack of exclusive tax benefit on the principal amount of home loans makes them indifferent towards a house purchase. A separate annual deduction of Rs 1,50,000 for principal repayment will improve housing affordability and provide the much-needed fillip to opt for home loans," Shishir Baijal, Chairman and Managing Director at Knight Frank India said.
Knight Frank India has also recommended that government should increase deduction limit under Section 24. Currently Section 24 allows deduction of Rs 2 lakh on housing loan interest. If it is extended to Rs 5 lakh it will boost affordability and housing sales, the company said.
The international property consultant has called for rationalisation of capital gains tax arising out of sale of real estate.
“Under section 54 of the Income Tax Act, long-term capital gains from sales of existing house can be utilized in buying or constructing a new property. If the investment for exemption is done through an under-construction property, it can be claimed only if the construction of the property is completed within three years of sale of the earlier house. Residential projects are continuously increasing in scale in terms of number of units, height and amenities which causes them to have completion timelines in excess of three years. Also, while the implementation of RERA has caused an improvement, the completion timelines of under-construction projects frequently exceed deadlines. This causes significant hindrances to homebuyers in setting-off capital gains in under-construction properties. To mitigate this, we recommend that the completion timeline of under-construction properties be extended to five years instead of the existing three,” Baijal said.
Meanwhile, in order to boost rental housing for affordable sector government should give 100 per cent exemption for rental income up to Rs 3 lakh for houses up to Rs 50 lakh, he added.
“This will encourage individuals to invest in the affordable housing segment which suffers a massive housing shortage. Given the low rent yields, owners of such houses avoid letting it out. This measure will directly incentivize such owners to rent out their houses to the targeted segment, augmenting the efforts to increase housing stock in this segment,” Baijal explained.