By Dr. Sanjay Chaturvedi, LLB, PhD
Buying a home in India today is not just a dream—it is a financial battle. While governments repeatedly talk about “Housing for All”, the taxation framework tells a very different story.
A home loan borrower currently enjoys a tax exemption of ₹1,50,000 per year on principal repayment under Section 80C and up to ₹2,00,000 on interest under Section 24(b). These limits were introduced nearly two decades ago. Though budgets have come and gone, the rationale behind these outdated figures has never been revisited in light of today’s market realities.
The Ground Reality of Urban Housing
In any major urban centre today, the average cost of a modest home is close to ₹1 crore.
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Loan-to-value ratio: 85%
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Average loan amount: ₹85 lakh
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Monthly EMI: ₹85,000 (approx.)
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Annual outflow: ₹10 lakh
A borrower pays nearly ₹10 lakh per year toward EMIs, yet the government offers a tax relief of only:
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₹1.5 lakh on principal, and
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₹2 lakh on interest
This is grossly disproportionate to the financial burden borne by home buyers.
A modern tax policy must reflect modern housing costs.
Taxation: A Jajia on Home Buying
Home buying in India is burdened with multiple layers of taxation imposed by:
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Central Government
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State Government
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Local Self-Governments
A home buyer pays:
| Tax Component | Approximate Rate |
|---|---|
| GST | 12% |
| Stamp Duty | 7% |
| Local Body Taxes & Surcharges | 3–5% |
| Total Tax Burden | Up to 22% |
Even affordable housing struggles to absorb 5% of capital cost, yet buyers are expected to pay 22% in taxes.
When a home buyer must arrange 15% margin money upfront, how can the same person also absorb 22% in taxes?
This is nothing short of economic injustice.
What the Union Budget Must Do
The Union Budget must recognize that:
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Housing prices have increased 3–5 times over two decades
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Incomes have not risen proportionately
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EMIs now consume 40–50% of household income
Key Reforms Needed
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Enhance home loan exemption to ₹10 lakh per annum
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Rationalize GST on residential properties
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Reduce Stamp Duty uniformly across states
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Offer special incentives for first-time home buyers
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Treat housing as a basic necessity, not a luxury commodity
If the government truly believes in “Housing for All”, taxation must enable, not punish, home ownership.
Conclusion
Home buyers are the backbone of urban India. They fuel:
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Construction
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Employment
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Infrastructure
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Economic growth
Yet, they are subjected to outdated exemptions and excessive taxation.
This Union Budget must correct this historic imbalance.
Tax exemption on home loans must be increased to ₹10 lakh or more.
Only then will home ownership become a realistic dream rather than a lifelong financial burden.