There are many things that the common man expects from the finance minister in the next budget, especially with regard to taxes. One of the areas where taxpayers expect relief is the income tax on homeownership. It should be noted that the latest budgets have had some beneficial proposals for homeowners, aimed at achieving the government’s commitment to “Housing for all” by 2022.
Increase in the standard deduction.
According to the provisions of the Income Tax Act of 1961, in the case of a rented property, the net annual value of the property of the home is calculated by deducting the amount of municipal taxes paid from the gross value of the rental (usually the rental income, subject to exceptions). From the net annual value, a standard deduction of 30% is allowed for the repair and maintenance costs of the house (regardless of the actual expense), together with a deduction for the interest paid on the home loan, at the time the taxable income from homeownership.
The standard deduction of 30 per cent has not seen any increase since 2002. The government could increase the deduction to at least 50 per cent given inflation in the cost of repairs, utilities and home maintenance.
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Increase interest deduction on home loans
Interest on the home loan can be claimed as a deduction while calculating the taxable income. The deduction is limited to Rs 2 lakh for independent homeownership, subject to the underlying conditions, while there is no upper limit on the amount of interest that can be claimed as a deduction for rented homeownership.
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