<p>As Finance Minister Nirmala Sitaraman presents the 2025-26 Union budget on February 1, she will be facing a few unfavourable macro-indicators of our economy and geopolitical issues including the threat of Trump’s tariffs.</p>.<p>The FM has the daunting task of initiating programmes and policies, and allocating resources to promote economic growth through infrastructure push, boost the sagging consumer demand, and rein in the runaway inflation. </p><p>The December Consumer Price Index (CPI) inflation is at 5.22%, food inflation is at 8.39%, education inflation is at 3.89%, and transportation inflation is at 2.64%. To alleviate the miseries of the middle class and to give a boost to the urban and rural consumption for the ‘demand-pull’ effect, the FM will have to provide the following income tax reliefs, and a rationalisation of tax slabs to facilitate in-pocket cash to promote consumption with higher disposable income:</p>.<p>A revision of the income tax slab of “income up to Rs 5 lakhs” under the NIL slab could be a start. This will marginally offset the inflation effect. There could be a provision of 3-4 IT slabs without frills – Rs 0 to Rs 5 lakh: NIL; Rs 5 lakh to Rs 10 lakh: 5%; Rs 10 lakh to Rs 25 lakh: 10% and above Rs 25 lakh: 20%. Additional cess could be levied on the super-rich earning incomes above Rs 45 lakh per annum. </p><p>The standard deduction limit could be raised to Rs 1 lakh for individuals and the deduction on family pension for pensioners to Rs 50,000. An increase in the tax benefits for medical/health insurance premiums paid u/S 80D – from the present Rs 25,000 to Rs 40,000 and for senior citizens to Rs 70,000 per fiscal year – could prove effective.</p>.<p>The National Statistical Organisation (NSO), in its first advance estimates, has revised the GDP growth for the financial year 2024-25 in the downward direction to 6.4% as against 8.2% in the previous year, FY24. The FM in the ensuing budget will have to provide the infrastructure push approach, keeping real estate/affordable housing as the major drivers of economic growth through the multiplier effect of employment, income, savings, and investment cycles.</p>.<p>Though housing sales have increased 7% in 2024 year on year, the irony is in the decline of the most critical segment of affordable housing: < Rs 50 lakh apartments, by a staggering 10%, between 2019 and 2024. Priority-sector lending under housing loans has grown at an anaemic 2% between July and November 2024 at Rs 7.52 lakh crore as against a 20% growth in the previous year.</p>.<p><strong>Fillip to the sector</strong></p>.<p>For concrete results and spin-off benefits of the multiplier effect, the following needs to be accorded:</p>.<p>1. Increase the ceiling for rebate u/S 80C, separately of Rs 1.5 lakh for principal deduction of housing loan EMIs and not to be clubbed with the Omnibus benefits under the section. </p><p>2. Enhance deduction under interest paid for housing loans from Rs 2 lakh to Rs 4 lakh u/S 24/24B. </p><p>3. The limit u/S 80 EEA could be raised from the present Rs 1.5 lakh to Rs 2 lakh for apartments/house properties having a stamp value of Rs 45 lakh. It is time to raise the ceiling to Rs 60 lakh. </p><p>4. Interest deduction from EMIs u/S 80EE needs to be increased from the present Rs 50,000 to at least Rs 1 lakh for a loan amount of up to Rs 35 lakh for property value of up to Rs 50 lakh for ‘first home’ purchases. </p><p>5. Reintroduce the cash link subsidy scheme for affordable housing.</p>.<p>6. To augment the supply of affordable housing and to compensate builders in the liquidity crisis coupled with the lukewarm demand for purchase of affordable apartments, the tax holiday on profits earned from Affordable Housing Projects u/S 80IBA has to be extended by at least one more year, for projects approved till March 31, 2024. </p><p>7. Tax sops from rental income will boost investment in rental housing. </p><p>8. Granting infrastructure status to the real estate sector presently restricted to ‘affordable housing’ will encourage builders to take up more projects. </p><p>9. The very definition of affordable housing – as a residential unit with 90 sq m carpet area and Rs 60 lakh apartment cost in metros; 120 sq m carpet area with a unit cost of Rs 55 lakh in non-metros – needs to be revised. </p><p>10. The productivity-linked incentive (PLI) scheme needs to be introduced in the affordable housing segment to incentivise all stakeholders.</p>.<p><br><em>(The writer is a former banker)</em></p>
<p>As Finance Minister Nirmala Sitaraman presents the 2025-26 Union budget on February 1, she will be facing a few unfavourable macro-indicators of our economy and geopolitical issues including the threat of Trump’s tariffs.</p>.<p>The FM has the daunting task of initiating programmes and policies, and allocating resources to promote economic growth through infrastructure push, boost the sagging consumer demand, and rein in the runaway inflation. </p><p>The December Consumer Price Index (CPI) inflation is at 5.22%, food inflation is at 8.39%, education inflation is at 3.89%, and transportation inflation is at 2.64%. To alleviate the miseries of the middle class and to give a boost to the urban and rural consumption for the ‘demand-pull’ effect, the FM will have to provide the following income tax reliefs, and a rationalisation of tax slabs to facilitate in-pocket cash to promote consumption with higher disposable income:</p>.<p>A revision of the income tax slab of “income up to Rs 5 lakhs” under the NIL slab could be a start. This will marginally offset the inflation effect. There could be a provision of 3-4 IT slabs without frills – Rs 0 to Rs 5 lakh: NIL; Rs 5 lakh to Rs 10 lakh: 5%; Rs 10 lakh to Rs 25 lakh: 10% and above Rs 25 lakh: 20%. Additional cess could be levied on the super-rich earning incomes above Rs 45 lakh per annum. </p><p>The standard deduction limit could be raised to Rs 1 lakh for individuals and the deduction on family pension for pensioners to Rs 50,000. An increase in the tax benefits for medical/health insurance premiums paid u/S 80D – from the present Rs 25,000 to Rs 40,000 and for senior citizens to Rs 70,000 per fiscal year – could prove effective.</p>.<p>The National Statistical Organisation (NSO), in its first advance estimates, has revised the GDP growth for the financial year 2024-25 in the downward direction to 6.4% as against 8.2% in the previous year, FY24. The FM in the ensuing budget will have to provide the infrastructure push approach, keeping real estate/affordable housing as the major drivers of economic growth through the multiplier effect of employment, income, savings, and investment cycles.</p>.<p>Though housing sales have increased 7% in 2024 year on year, the irony is in the decline of the most critical segment of affordable housing: < Rs 50 lakh apartments, by a staggering 10%, between 2019 and 2024. Priority-sector lending under housing loans has grown at an anaemic 2% between July and November 2024 at Rs 7.52 lakh crore as against a 20% growth in the previous year.</p>.<p><strong>Fillip to the sector</strong></p>.<p>For concrete results and spin-off benefits of the multiplier effect, the following needs to be accorded:</p>.<p>1. Increase the ceiling for rebate u/S 80C, separately of Rs 1.5 lakh for principal deduction of housing loan EMIs and not to be clubbed with the Omnibus benefits under the section. </p><p>2. Enhance deduction under interest paid for housing loans from Rs 2 lakh to Rs 4 lakh u/S 24/24B. </p><p>3. The limit u/S 80 EEA could be raised from the present Rs 1.5 lakh to Rs 2 lakh for apartments/house properties having a stamp value of Rs 45 lakh. It is time to raise the ceiling to Rs 60 lakh. </p><p>4. Interest deduction from EMIs u/S 80EE needs to be increased from the present Rs 50,000 to at least Rs 1 lakh for a loan amount of up to Rs 35 lakh for property value of up to Rs 50 lakh for ‘first home’ purchases. </p><p>5. Reintroduce the cash link subsidy scheme for affordable housing.</p>.<p>6. To augment the supply of affordable housing and to compensate builders in the liquidity crisis coupled with the lukewarm demand for purchase of affordable apartments, the tax holiday on profits earned from Affordable Housing Projects u/S 80IBA has to be extended by at least one more year, for projects approved till March 31, 2024. </p><p>7. Tax sops from rental income will boost investment in rental housing. </p><p>8. Granting infrastructure status to the real estate sector presently restricted to ‘affordable housing’ will encourage builders to take up more projects. </p><p>9. The very definition of affordable housing – as a residential unit with 90 sq m carpet area and Rs 60 lakh apartment cost in metros; 120 sq m carpet area with a unit cost of Rs 55 lakh in non-metros – needs to be revised. </p><p>10. The productivity-linked incentive (PLI) scheme needs to be introduced in the affordable housing segment to incentivise all stakeholders.</p>.<p><br><em>(The writer is a former banker)</em></p>
