Will Budget 2024 retain tax benefits on home loan interest and principal? 

As Finance Minister Nirmala Sitharaman and her team in the Ministry of Finance are burning midnight oil to propose the best in Modi 3.0 first full 2024 Union Budget, expectations are soaring high among the people, companies as well as investors as to who will get what from it.

Among several expectations, one is that the tax benefit on home loan interest under Section 24 of the I-T Act be increased from Rs 2 lakh to Rs 5 lakh in the Budget 2024.

Several housing companies as well as financial experts are also having demand for a separate section for home loan principal repayment with a tax deduction limit of up to Rs 3 lakh.

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For the unversed, currently, the home loan principal is part of Section 80C deductions under which an individual is eligible for tax deduction on the amount paid as repayment of the principal component of the housing loan.

Under Section 80C, which is already saturated with several other tax sops, a person can claim up to Rs 1.5 lakh as tax deduction.

The real estate sector in India has been experiencing a mix of challenges and opportunities. Among the opportunities, one of the major is the rising demand for affordable housing, which is getting fillip by government initiatives such as Pradhan Mantri Awas Yojana (PMAY).

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The other measures adopted the government over the past few years include increased tax exemptions on housing loan interest, tax relief for transactions up to Rs 2 crore, implementing denotification scheme of special economic zone (SEZ) and the Special Window for Affordable and Mid-Income Housing (SWAMIH) scheme for stalled housing projects which have led to a growth in demand.  

As per CareEdge report on expectations from the Union Budget 2024-25, “The real estate sector now seeks a revival strategy for affordable housing, industry status, and additional tax incentives to further boost demand."

“Deduction limit for interest payment on home loans to be increased from the existing Rs 2 lakh a year,” said JM Financial in its Union Budget Preview.

Meanwhile, IndusLaw’s Lokesh Shah said: “Individual taxpayers expect that the Union Budget 2024-25, Budget of Modi Government 3.0, to be a silver lining. With the government persisting on to opt for the  new tax regime, the Budget is expected to be more appealing with introduction of benefits like house rent allowance, deduction of interest on home loan or change in the limit of standard deduction under the new tax regime."

“Presently, a standard deduction of Rs 50,000 is allowed to all salaried individuals. This quantum was set in 2018. Inflation demands an increase in the limit of standard deduction. This will be a relief for taxpayers under both the old and new tax regime,” Shah added.