2. Home loan borrowers
The law presently allows a tax payer to claim interest paid on money borrowed for purchase or construction of a house. For let out property the tax payer can claim full interest paid but for self occupied property the deduction is restricted to Rs. 2 lakh. However in case construction of the house is not completed within a three years from the end of the year in which the money is borrowed the quantum of deduction available was substantially reduced to Rs. 30,000. In the present status of real estate sector where delay in completion of construction beyond three years is norm rather than an exception, the tax payers were penalised for no fault of theirs. The finance minister has proposed to extend the period for completion of construction from three years to five year.
In addition to extending the period for construction, the finance minister has also proposed an additional benefits of Rs. 50,000/- in respect of interest paid to financial institution for house costing whereof does not exceed Rs. 50 lakh and the money borrowed does not exceed Rs. 35 lakh provided the Individual does not own any house as on the date of the sanction of the home loan.