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The Indian government may raise the tax exemption limit on home loan interest by Rs. 50,000 this year, in what will help thousands of families save more money. Finance Minister Arun Jaitley is planning to raise the present cap of Rs.200,000 up to Rs.250,000 in the 2015-16 budget to be announced in February. If the proposal is implemented, an individual with an outstanding 20-year home loan of Rs. 5 million will be left with an additional Rs.15,000 a year approximately. A government official said it is important to align the tax deduction on housing loans with interest rates. The increase, the government hopes, will set off a cascading effect that helps create more jobs in the construction sector by catalyzing the realty market. This year, the exemption limit on housing could be further increased, a move that would encourage people to buy houses and even give a boost to the credit demand that has been weak but steps are being taken to ensure that credit growth picks up in the next financial year, the official said. A hike in tax deduction on housing loans interest along with a probable rise in the annual overall exemption limit will enhance people`s disposable income, which, in turn will boost spending as well as savings. The move will also help in enhancing household savings.
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