The Hindu Business Line : Draft tax code: It’s still advantage home loan borrower

New Delhi, Aug 13 The Draft Direct Taxes Code may take away the Rs 1.5 lakh deduction for housing loan interest repayment but tax experts feel that other benefits such as widening of income slabs and increase in savings limit could far outweigh the proposed removal of tax breaks on interest repayment.

“The code does not provide for the Rs 1.5 lakh interest deduction that is available to a loan borrower. However, the code has been generous in terms of the income slabs. Separately, the deduction for savings is proposed to go up from Rs 1 lakh to Rs 3 lakh. So, on a net-net basis, the proposals may not disadvantage the home loan borrower,” said Ms Neeru Ahuja, Partner, Deloitte Haskins & Sells.

More disposable income

Mr Nikhil Bhatia, Executive Director at PwC, said that although some benefits are proposed to be taken away, the effect of that could be substantially reduced as more money will now be in the hands of the individual. “So one way to look at it could be that the incentive is less but the fact is that, overall, because of the tax relief, more disposable income is now available,” he said.

Many developers said they would wait for more details before commenting on the implications for the housing sector.

Area of concern

“We will have to look at the fine print, and it will take time. But at the end of the day, if it (the tax code) puts more money into the hands of the buyer, that is fair enough. It’s too premature to draw conclusions at this stage. The simplification is good. But we will have to wait and see if it dis-incentivises rental housing or purchase of homes — that is an area of concern,” said Mr Kumar Gera, Chairman of industry body CREDAI.

Some like Mr Aseem Chawla, Partner, Amarchand and Mangaldas, felt that while in the wake of simplification, the new direct tax code proposes to do away with exemptions and deductions, the process of phasing them out should be gradual. “In the wake of simplification, the draft code proposes to do away with exemptions, deductions and incentives. However, the process should be gradual and each deduction like the one on interest on borrowed capital in the case of self-occupied property, should be gradually removed. The proposed removal of deduction on interest on borrowed capital for housing needs to be revisited,” said Mr Chawla.

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