Budget 2020: 'Reconsider limit on claiming of loss from house property'

One of the areas where people may be expecting relief is in house property taxation.

Published: Jan 10, 2020
Budget 2020: 'Reconsider limit on claiming of loss from house property' Image: Shutterstock

Divya Baweja, Tarun Garg & Jatin Rustagi



With the Budget 2020 round the corner, taxpayers are hoping for some concessions on the personal tax front. This emanates mainly from the Finance Minister's recent announcement to provide relief on personal taxes. One of the areas where people may be expecting relief is the house property tax.

The Income Tax Act, 1961, limits the deduction of housing loan interest for a self-occupied property to Rs 2 lakh. Considering the increased housing cost and the resultant rise in home loan EMIs, this limit needs should be increased.

Under the Act, pre-construction interest, which can be claimed in five equal instalments, is also included in the overall limit of Rs 2 lakh for a self-occupied house.

Given the high component of interest in EMIs in the initial years, taxpayers may not be in a position to reap the benefit of the deduction of the pre-construction period interest. There is a long-pending demand from taxpayers to enhance the deduction towards interest payment.

The Finance Act, 2017, introduced a cap on setting-off of loss from the house property, which adversely impacts individuals having income from a let-out property. The total loss that can be allowed to be set-off under the ‘income from house property' head is only Rs 2 lakh from FY 2017-18 and the remaining loss, if any, can be carried forward to eight tax years. The carry-forward loss which remains unutilised lapses. This has led to hardship for taxpayers because the interest component in the EMI for home loans is generally substantial in the initial years.

Further, the carry-forward loss needs to be set off only from ‘income from house property', which restricts the benefit. This implies that one would not be able to set off the carried forward loss if there is no income from house property. Hence, the utilisation of carry-forward loss becomes difficult and the individual is unable to avail the tax benefit in complete.

It is, therefore, hoped that the pre-2017 tax regime is restored, so that the entire interest cost should be availed as a deduction from a let-out property, which will provide some respite.

In Budget 2019, an additional interest deduction of Rs 1.5 lakh was extended to the first-time home-buyers purchasing an affordable house of up to Rs 45 lakh, for loans sanctioned till March 31, 2020, subject to conditions. It is expected that the limit of Rs 45 lakh is enhanced and the period of loan sanction extended to March 31, 2021.

Though the wishlist can be unending, these suggestions will certainly boost public sentiment and may encourage investment in housing property, which will also be a step towards the government's aim of “housing for all”.

(Divya Baweja is Partner at Deloitte India, Tarun Garg is Senior Manager, and Jatin Rustagi is an Executive with Deloitte Haskins and Sells LLP.)

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