Financial Daily from THE HINDU group of publications
Saturday, Dec 14, 2002
Industry & Economy - Income Tax
I-T sops for housing will stay, says Jaswant
NEW DELHI, Dec. 13.
IT'S official now. The Government will not dispense with income-tax incentives for the housing sector in the ensuing fiscal.
The Finance Minister, Mr Jaswant Singh, today told the Lok Sabha that the Government had no intention to reverse the policy of tax incentives for the housing sector which had grown at a rapid pace compared to other sectors in the past three years.
"It will not be sensible to reverse the policy for the housing sector which has shown 25 per cent growth in the past three years'', Mr Singh said when asked whether the Government planned to continue with fiscal incentives for the sector.
The Finance Minister's statement implies that tax incentives for housing would continue even if the Kelkar panel on direct taxes decides to recommend its phase-out in the final report to be submitted shortly.
In its consultation paper, the panel had recommended phasing out the income-tax deduction available on interest on housing loans for owner-occupied houses. Currently, I-T deduction is available on the interest component (up to Rs 1.5 lakh) on housing loans.
The panel recommended pruning the deduction to Rs 1 lakh in assessment year 2004-05, Rs 50,000 in assessment year 2005-06 and nil in assessment year 2006-07.
The panel's suggestion drew flak from within the BJP in view of the political ramifications. The Minister has now made it clear that the existing dispensation on tax incentives for housing would continue.
According to him, several fiscal incentives have been provided to the housing sector in the three successive Budgets. The financial institutions have liberalised lending norms, reduced rates of interest, increased the tenure of the loan and eased collateral requirement.
These measures, along with the downward movement of interest rates in the economy and increased competition among the institutions engaged in providing financial assistance for housing, have improved both accessibility and affordability of housing finance.
All commercial banks are now required by the Reserve Bank of India to provide a minimum of three per cent of incremental deposits for housing finance.
The interest on loans up to Rs 2 lakh should not exceed the prime lending rate of the banks and beyond Rs 2 lakh, banks have the operational flexibility in deciding their lending rates, according to the guidelines.
He added that the National Housing Bank projected a 25 per cent growth in the housing sector over the next three years if the existing fiscal and monetary incentives continued to be available.
The total housing finance disbursed by commercial banks and housing finance corporations increased from Rs 19,723.38 crore in 1999-2000 to Rs 29,600.25 crore in 2001-02. It is estimated that in 2002-03, the disbursement will touch Rs 37,000 crore.
Only 2.9 pc of population under tax
MR Jaswant Singh informed the Lok Sabha that only 2.92 per cent of the country's population is covered under direct taxes as on March 31, 2002. Rationalisation and simplification of tax laws, initiated some time back, has had positive results in terms of an increase in the number of tax payers over the past few years, he said.
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