Home loan interest gets benefit ,Home loan takers can rejoice.

Home loan takers can rejoice. The revised discussion paper on the Direct Tax Code (DTC) has proposed to continue with the existing system of deducting interest payment (up to Rs 1.5 lakh) against home loan from total income before calculating the tax liability.
The discussion paper released on August 2009 had proposed to do away with all the exemptions, including the tax benefit on interest payment against home loan. This, if implemented, could discourage home buyers.
However, the department had also increased the exemption limit to Rs 3 lakh from the present level of Rs 1.1 lakh against investments in select instruments like PPF, pension funds and life insurance schemes. The Rs 1.5 lakh interest benefit against home loan will be included under 3 lakh ceiling.
In the DTC, the government had earlier argued that as the exemption limit against investments has been increased, taxpayers will not be affected if benefit on interest payment against home loan is withdrawn. However, the withdrawal attracted a lot of criticism. And the government finally decided to get back to the earlier system.
Even if the interest payment against home loan is not treated as a separate category and will be the part of the exemption limit of Rs 3 lakh, taxpayers will still benefit. According to the original DTC proposal, interest payment against home loan was not allowed for deduction from the income. As many middle-income taxpayers will find it difficult to exhaust the 3 lakh ceiling, inclusion of interest payment of Rs 1.5 lakh in the total exemption limit will be beneficial.
According to experts, government should continue with the deduction against interest payment on home loan as a separate category, considering contribution of the housing sector to the gross domestic product.
Courtesy TOI dtd: 16/06/2010
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