Ahead of the upcoming budget, industry body PHDCCI has suggested that the full interest payment towards housing loan for at least one house should be eligible for tax deduction and the deduction should be available from the year in which the capital was borrowed from the bank. PHDCCI has suggested several tax measures needed in the budget to boost the real estate sector. The industry body has also suggested tweaks in the Section 54, which deals with exemptions from capital gains tax on sale of property.

As per the section 24(b), deduction on account of interest payment on housing loans is permissible to owners of rented dwelling units to the fullest extent in some cases. In case of self occupied houses the limit is set at ₹2 lakhs. Also, the deduction is available after acquisition or construction is completed within five years from the end of the financial year in which capital was borrowed.

“It is suggested that the deduction on account of interest payment available under section 24 should be made applicable from the year in which capital was borrowed and should be allowed to the extent of full interest paid, at least in respect of one house,” said Saket Dalmia, President, PHDCCI in the pre budget recommendations on tax matters.   

Alternatively, Dalmia suggested that in case this is not agreed by the government, the current deduction limit of ₹2 lakhs should be raised to ₹3 lakhs for owner occupied houses. “Also, a five years period for acquisition/completion from the year of borrowing should be dispensed with. This will provide much needed impetus to the housing sector which is reeling under huge housing shortage and relief to consumers, in view of delayed projects due to cash flow,” said Dalmia.

On the exemption under Section 54 and Section 54F PHDCCI pointed out that if an assessee sells a long term capital asset and buys a shop, exemption is not allowed on the investment.

“We suggest that investment in one shop should also be allowed as exemption from capital gain earned on sale of assets under Section 54 and Section 54F. This will help in boosting investment in the economy and will be beneficial for small traders and shopkeepers,” said Dalmia.

Also currently, capital gain arising from sale of real estate is exempt from tax in cases where the sale proceeds are invested in acquiring/constructing two residential houses anywhere in India. Such a restriction is deterrent to the objective of boosting the housing stock, and hence needs to be repealed, PHDCCI points out. 

“To overcome the huge housing shortage in the country, the restriction imposed on investment of sale proceed on acquiring two residential houses should be removed and scope broadened to exempt capital gain tax if the sale proceed is invested in creating housing stock without any limitation of number of units for Individuals and HUF,” said Dalmia. 

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