Budget raises tax deduction on housing loan interest to ₹3.5 lakh

In the only relief to the middle class, the Union budget 2019 has given taxpayers another ₹1.5 lakh deduction benefit in taxes on interests paid towards home loans taken up to 2020, taking the total benefit under the scheme to ₹3.5 lakh a year.

Earlier, taxpayers who had taken a home loan, had ₹2 lakh paid on interest deducted from their taxable income for self-occupied property. This has been raised by ₹1.5 lakh to ₹3.5 lakh a year.

Presenting the first budget of the second Narendra Modi government, Finance Minister Nirmala Sitharaman said the government will also provide income tax deduction of Rs 1.5 lakh on interest paid on loans taken for purchase of electric vehicles.

The move is seen as a bid to boost affordable housing segment, which has seen a slump in the last few years.

Earlier, presenting the interim budget before the elections in February, the then-acting finance minister Piyush Goyal had waived taxes for those having income up to ₹5 lakh. The additional ₹3.5 lakh deduction on housing loan interests will help people save ₹8.5 lakh from their taxable income.

However, in a key move that is likely to hurt middle class, the government has raised by ₹1 the cess on petrol and diesel. This will be above the state and central GST rates that are charged on the fuel.