New Delhi, Feb 1 (PTI) The government on Monday extended the additional tax deduction of Rs 1.5 lakh on interest paid on housing loan for purchase of affordable homes by one more year to March 31, 2022, a move aimed at boosting demand in the sluggish real estate sector.

Central government provided an additional income tax deduction of up to ₹1.5 lakh for home loans to purchase an affordable housing. Sitharaman extended the eligibility of this tax deduction till 31 March, 2022.

The additional deduction of Rs 1.5 lakh over and above Rs 2 lakh was introduced in the 2019 budget. This was allowed for those buying homes for the first time and of up to Rs 45 lakh cost.

In the budget speech for 2021-22 fiscal year, Finance Minister Nirmala Sitharaman said the government sees ”Housing for All” and affordable housing as priority areas.

“In the July 2019 Budget, I provided an additional deduction of interest, amounting to Rs 1.5 lakh, for loan taken to purchase an affordable house. I propose to extend the eligibility of this deduction by one more year, to 31st March 2022,” she said.

The minister said the additional deduction of Rs 1.5 lakh shall therefore be available for loans taken up till March 31, 2022, for the purchase of an affordable house.

Now, a person purchasing an affordable house will get an enhanced interest deduction of up to Rs 3.5 lakh.

“Further, to keep up the supply of affordable houses, I propose that affordable housing projects can avail a tax holiday for one more year – till 31st March, 2022,” Sitharaman said.

The minister said that the government is committed to promote supply of affordable rental housing for migrant workers. “For this, I propose to allow tax exemption for notified Affordable Rental Housing Projects.”

As per the budget document, developers constructing the affordable rental housing project will also get tax holiday as they have been availing for affordable housing projects.

“The existing provision of the section 80-IBA of the Act provides that where the gross total income of an assessee includes any profits and gains derived from the business of developing and building affordable housing project, there shall, subject to certain conditions specified therein, be allowed a deduction of an amount equal to hundred per cent of the profits and gains derived from such business,” the budget paper said.

One of the conditions is that the project is approved by the competent authority after the 1st day of June 2016, but on or before the 31st day of March 2021.

To help migrant labourers and to promote affordable rental, it is proposed to allow deduction under section 80-IBA of the Act to such rental housing projects which is notified by the Central Government in the Official Gazette and fulfils such conditions as specified in the said notification.

“Further, it is also proposed that the outer time limit for 31st March 2021 in this section for getting the affordable housing project approved be extended to 31st March 2022 and the same outer time limit be also provided for the proposed affordable rental housing project,” the document said.

These two Budget proposals are aimed at increasing demand as well as supply in the affordable housing segment, which has already been accorded infrastructure status.

According to property consultants and data analytic firms, housing sales across major 7-8 cities fell around 40-50 per cent during the 2020 calendar year due to the COVID-19 pandemic. However, demand has been steadily improving since July last year on pent-up as well festive demand.