Union Budget 2023-24
This is the final full budget before the general elections in April-May next year I Photo: iStock

Relief in I-T, hike in housing loan interest: What to expect from 2022 Budget

The Union budget, which will be the penultimate budget of the current government before the 2024 general elections, will be presented on February 1. It is also being presented just a few days before the Assembly elections in five major states.

For the middle class, the main expectation is that there would be a possible relief in the income tax. Under 80C of the Income Tax Act, the last time the relief was revised was in 2014, and now the demand is for increasing the total amount from ₹1.5 lakh.

Similarly, the housing loan interest under Section 24 at present is ₹2 lakh maximum, but the demand is to increase at least up to ₹5 lakh, as the property prices have increased across all big cities and the total loan taken has increased.

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Tax analysts feel hiking the ₹2 lakh tax rebate on housing loan interest rates, under Section 24 of the Income Tax Act, to at least ₹5 Lakh could instantly increase demand for housing, especially in the affordable and mid-segment categories.

“Property stakeholders want the ₹2 lakh tax deduction on interest paid on home loans to be increased to ₹5 lakh, as it will bring more salaried people in the bracket and help them realize their dream of buying a home,” said a tax analyst.

This decision will also keep demand for healthy housing and help property developers recover their losses and increase their wafer-thin profit margins.

On the tax relief and revision of tax base, the expectation is either a cut in tax rates or revision of tax slabs. “There are several savings which are under the Section 80C bracket. Beyond this many middle-class tax payers are not able to save and thus face tax cut in their salaries,” said the analyst.

“Time is certainly ripe for a further upward revision in the tax relief, but there is no denying that the government currently lacks the elbow space for such a move. Instead, it may focus on providing more incentives to MSMEs and SMEs struggling post the pandemic. Also, the government spending on infrastructure may further get a boost,” said the analyst.

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The analyst also said that the budget should continue to focus on expansionary policy measures to boost consumer spending and investments.

“Measures to boost affordable and mid-income housing in the form of extension and expansion of tax benefit for first-time home buyers, sops for developers engaged in affordable housing and rental housing projects will have a positive domino effect on the real estate sector and the overall economy,” said the analyst.

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