If the Parliamentary Standing Committee on Finance has its way, housing loans availed from employers can qualify for getting the existing tax breaks on such loans for individuals.
At present, Section 24 of the Income Tax Act, 1961, simply provides that interest paid by an individual tax payer (up to a limit of Rs 1.50 lakh) towards a housing loan, could be deducted from the individual's total income.
Tax experts say this person could mean a financial institution, an employer, sibling, relative or anyone. There is only one condition and that is that a certificate of interest payment will be required to be furnished.
The committee in its draft report is understood to have said: “It would expect that necessary modifications will be made in the code, as agreed to by the Ministry of Finance providing for prescribed exemption in respect of interest on loan taken for self-occupied house, so as to include in its ambit loan taken from all types of employers, apart from financial institutions.” On the other hand, sub-Clause 2 of Clause 74 in the new Direct Tax Code Bill talks about interest payable to the financial institution. Tax experts believe that such a clause might restrict the definition of borrowers to banks, housing banks and other financial institutions, but not other lenders such as employers, relatives or siblings.
Meanwhile, the Standing Committee is understood to have favoured a higher limit for deduction of house rent. The Committee feels that keeping in view the rising cost of renting out accommodation for a common man, the proposed monetary limit of Rs 2,000 a month for deduction in respect of rent paid might be enhanced to Rs 5,000 a month. It has also been advised to revise the limit periodically to keep it in sync with the prevailing market conditions.
The draft report is being discussed by the Committee. It is expected to approve the report by March 2. Then it will be submitted to the Lok Sabha Speaker.