The Hindu Business Line : I-T relief of up to Rs 3 lakh on home loan interest sought

At present, the interest paid on housing loan up to Rs 1.5 lakh is allowed as deduction from taxable income. Housing finance companies want this limit to be raised to Rs 2-3 lakh. “After the kind of slump the housing sector witnessed last year, there is a need to give some impetus to potential buyers as even now, bulk of the customers are undecided whether to go in for a house or not. The tax break on interest paid on housing loans of Rs 1.5 lakh is sufficient to cover the interest of loans in the range of Rs 10-30 lakh. However, the average cost of a house is much more and hence one should look to raise the limit to Rs 2-3 lakh,” said Mr R. R. Nair, Director and Chief Executive, LIC Housing Finance.

REDUCE EFFECTIVE TAX RATE

The housing finance companies also want to be allowed to transfer 40 per cent of their pre-tax profits to a special reserve so that the effective tax rate gets reduced. “Till two years ago, HFCs could transfer 40 per cent of their pre-tax profits to special reserves and claim the amount as a deduction in computing the tax liability. This brought down the effective tax rate for us. However, it was reduced to 20 per cent in the Finance Act, 2007. We want the 36 (1) viii benefit restored, allowing us to transfer 40 per cent of pre-tax profits into a special reserve,” said Mr Kapil Wadhawan, Vice-Chairman and Managing Director, Dewan Housing Finance.

INFRA STATUS TO HOUSING

The companies are also seeking infrastructure status for the housing industry. The housing sector is important for the economy as it supports around 136 ancillary industries. If encouragement is given to the housing sector, it will help other segments such as cement and steel as well. More funds will flow into the sector as banks can use the provision for infrastructure funding to lend, Mr Nair said.

SUB-SECTION UNDER 80C

Another demand is the creation of a sub-section for payment of the principal amount of the housing loan under section 80 C. At present, there are many instruments such as National Saving Certificates, equity-linked saving schemes of mutual funds, life insurance policies and provident fund that can be categorised as savings under Section 80C. Creation of a separate category under 80C of Rs 1 lakh only for the principal amount of the housing loan will help boost the housing sector, said Mr Nair.

HFCs also want the income generated from loans below Rs 30 lakh to be given tax exemption, so that the tax savings can be passed on to the customers through lower rates, Mr Nair said.

More Stories on : Budget | Housing Finance | Income Tax

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page