Budget 2022: From cut in home loan interest rates to rise of health insurance premiums, here’s common man’s wishlist
While on one side the government is taking measures to bring the economy back on track, on the other side it is equally important to give relief to the common man to overcome the impact of this crisis.
The expectation of the common man revolves around decreasing the tax burden and moving towards a more simplified tax compliance and administration framework.
As per the present tax provisions, interest on a housing loan taken during the construction of a property is allowed as a deduction in five equal instalments commencing from the year of completion of such house property. Many home buyers face a challenge due to this provision as they have to pay pre-EMI interest to the banks /financial institutions each year whereas, the corresponding tax deduction is postponed to future years. This results in an excessive financial burden on home buyers during the construction period and the burden is further extended if the construction gets delayed due to any reason.
It is suggested that deduction for interest payable during the construction period may be allowed in the year of payment itself. Apart from financial relief, this would also promote ease of compliance since the taxpayers would not have to maintain records of interest paid for an extended period of time.
This will ultimately leave more cash in hand which can be channelled towards expenditure as well
Presently, the home buyer is eligible to claim a deduction of up to Rs 200,000 towards interest payable during the year on a loan taken for purchase or construction of a self-occupied house property. This limit includes preconstruction period interest also. This limit should be increased to give more tax benefits to the taxpayers.
Apart from the above, to boost the real estate sector, a higher deduction for interest on housing loans is expected
The Finance Act 2014 had increased the threshold for deduction under Section 80 C of the Income-tax Act, 1961 (the Act) from Rs 100,000 to Rs 150,000 with the objective of encouraging household savings. In view of inflation on one hand and more avenues for consumption expenditure opening on the other, the household saving potential has been under stress.
Currently, the deduction allowed under section 80C covers a wide range of eligible investments/ expenses such as payment of life insurance premium, employee’s contribution to Provident Fund, Public Provident Fund (PPF), National Pension Scheme (NPS), housing loan principal repayment, Equity-linked saving schemes (ELSS), etc.
A major expectation of individual taxpayers is increasing the limits of various investment/ expenditure-linked deductions, under Section 80C of the Act to Rs 250,000 which will achieve the dual objective of encouraging savings and reducing tax. Alternatively, the government may also consider introducing separate deduction limits for repayment of principal on housing loans. This benefit would also contribute to improving the real estate market and will be another step towards the affordable housing goal of the government for the common man of this country.
Apart from ELSS, debt and hybrid funds can also be included for deduction under section 80C to encourage investors to invest in diversified funds.
Section 80D provides deduction in respect of payment made for health insurance premium for self, family, and parents. As per the provisions of Section 80D, an individual can claim deduction up to Rs 25,000 (Rs 50,000 in case of senior citizen) for health insurance premium paid for self, spouse, and family and similarly, a deduction up to Rs 25,000 (Rs 50,000 for senior citizen) for a premium paid for parents. Considering the increase in the rate of health insurance premiums with time and with rising expenses on healthcare due to COVID-19 and other reasons, the current deduction limit should be increased from Rs 25,000 to Rs 50,000 (and from Rs 50,000 to Rs 1,00,000 for senior citizens). This decision will also encourage more people to opt for health insurance policies and would contribute towards the growth of the insurance sector as well.