Home loan interest sop may be hiked to Rs 2L

New Delhi: The interim budget to be announced on Monday could bring some cheer to consumers and investors as acting finance minister Pranab Mukherjee may use the opportunity to announce one more stimulus package in the form of targeted tax incentives. Sources in the government told TOI that Mukherjee may announce tax sops aimed at boosting the housing sector, which has been identified as a potential driver for the economy and for job creation during a slowdown.
    Normally, propriety would demand that an outgoing government not announce any major policy decisions or changes in the tax structure in an interim budget. But given the global economic crisis and its impact on India, the UPA has the opportunity to argue that it cannot allow things to drift for months until the new government assumes office.
    One populist measure being seriously considered to kickstart the realty sector—which could help revive a number of related sectors like steel, cement and electrical appliances—is an increase in the deduction for housing loan payments. As things stand, taxpayers can deduct up to Rs 1.5 lakh on interest on home loans paid from taxable income. This limit could be raised to Rs 2 lakh. If it happens, it will enable those who have bought a house for self-use to save up to Rs 68,000, compared to the present Rs 51,000.
    Another possible sop for the housing sector could be reintroduction of Sec 80IA, under which corporates building dwelling units of less than 1,000 sq ft area were exempted from tax on the profits from these units. Incentives likely for cheaper housing, white goods, cars
New Delhi: The upcoming interim budget may include an incentive to nudge developers towards constructing smaller houses, making homes more affordable for the lower segment of the market.
    Government sources said that this could be the possible reintroduction of Section 80IA, under which corporates which are building dwelling units of less than 1,000 sq ft were exempted from tax on profits from these units.
    In the vote-on-account, the government may also announce some tax sops in the consumer durables and automobile sectors. While an across-the-board 4% cut in excise in December 2008 makes any drastic concessions difficult, a senior official hinted that excise duty on big cars with engine capacities of 1200 cc or more in petrol may be reduced to 16% from the existing 20%.
    Other indirect tax cuts may also be in the offing, given the twin objectives of bringing down prices to revive demand and protecting jobs, both of which are essential with elections round the corner.