DIRECT TAX CODE MAY SPARE HOME LOANS

A Finance Ministry official told to Economic Times that the Government may modify the draft direct tax code to retain tax shelters on interest and principal repayments for home loans to make the proposed new code more attractive for the average Indian. As per the proposed direct taxes code, which has been unveiled for public debate and is due to become operational from April 2011, does not provide tax incentives to loan-funded house purchases that are for personal use.

At present, tax payers are allowed to deduct from their income the interest paid on home loans to a maximum of Rs.1.50 lac every year. In addition, the repayment of the principal amount is also allowed to be included within the rebate available under Section 80 C, which has a maximum limit of Rs.1 lac.

The draft direct tax code has suggested increasing the exemption limit under Section 80C to Rs.3.00 lac, but the list of eligible expenditure/savings does not include the principal payment. The code also restricts the interest deduction only to houses rented out and where such income is included in the income of the assessee.
Source: http://economictimes.indiatimes.com/personal-finance/tax-savers/tax-news/Direct-tax-code-may-spare-home-loans/articleshow/5380167.cms