Union Budget 2025 Expectations: Home Loan Borrowers Hope for Enhanced Tax Benefits

As per the Deloitte India report, Home loan borrowers and industry experts have expectations from the Union Budget 2025-26, hoping that Finance Minister Nirmala Sitharaman will address their long-standing demands for increased tax benefits. Despite the government’s focus on promoting the new minimal exemption tax regime, stakeholders are advocating for reforms to make homeownership more affordable in urban India, where housing costs continue to soar.

Existing Tax Deductions 

Under the old tax regime, home loan borrowers can avail tax deductions under sections 80C and 24B. For a self-occupied house, borrowers can claim a maximum tax exemption of up to ₹2 lakh annually on home loan interest (Section 24B) and up to ₹1.5 lakh on principal repayments (Section 80C).

The average cost of housing has significantly increased over the years, resulting in larger home loans that strain borrowers’ incomes. For instance, a ₹30 lakh loan at 9% interest generates interest payments exceeding ₹2 lakh annually for the first 9 years of the loan tenure.

Proposals for Consolidated and Higher Tax Benefits

There is growing anticipation that the Union Budget 2025-26 may include reforms to simplify the Income Tax Act. Industry experts have recommended consolidating tax benefits for home loan interest and principal repayments under a single section dedicated to home loans.

Additionally, they propose increasing the overall deduction limit for home loans to ₹5 lakh, particularly to address the heavy financial burden in the initial years of loan repayment. By doing so, the government can promote home ownership, reduce taxpayers’ financial strain, and improve affordability.

A Push Towards Tax Compliance and Affordability

As part of a broader overhaul of the Income Tax Act, the government is aiming to streamline tax compliance for individuals. Introducing consolidated and enhanced deductions for home loan borrowers could simplify processes and encourage better tax compliance while also addressing the pressing issue of unaffordable housing in urban areas.

The proposed measures are expected to benefit both home loan borrowers and the real estate sector, aligning with the government’s objective of ensuring housing affordability and financial stability for taxpayers.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.