The National Real Estate Development Council (NAREDCO) has recommended the Union Ministry of Finance for setting a higher limit for interest deduction on home loans and reinstatement of the Income Tax Settlement Commission, in an attempt to give boost to the real estate sector.
“It is suggested that the deduction on account of interest payment available under Section 22 of IT Act 2025 should be made applicable from the year in which capital was borrowed as for principal u/s 80C and should be to the extent of full interest paid, at least in respect of one house," NAREDCO said in its recommendations to the Union Ministry of Finance.
The limit of Rs 2 lakh should be raised to Rs 5 lakh or more for owner occupied houses. Also, five years period for acquisition completion from the year of borrowing should be dispensed with.
“The real estate sector plays a critical role in India’s economic growth, employment generation and urban transformation. Rationalising taxation, especially on housing finance, will directly stimulate end-user demand, provide much-needed impetus to a sector grappling with a significant housing shortage, and offer relief to homebuyers impacted by project delays arising from cash flow constraints, while restoring overall buyer confidence,” said Parveen Jain, President, NAREDCO.
Currently, under Section 24(b) of IT Act 1961 (Section 22 of IT Act 2025), deduction on account of interest payment on housing loans is permissible to owners of rented dwelling units to the fullest extent. In case of owner occupied houses the limit is set at Rs 2 lakh. Further, the deduction is available after acquisition or construction is completed within five years from the end of the financial year in which capital was borrowed.
NAREDCO has also suggested the reinstatement of the Income-tax Settlement Commission. The commission established in 1976 to provide taxpayers a one-time opportunity to enter into a compromise and settlement arrangement with the Income-tax Authority to grant them relief from penalties and prosecution, was discontinued with effective from February 1, 2021.
The apex housing sector body said that the current dispute resolution scheme excludes certain specific cases including cases where lower appellate authorities disposed of the appeal prior to the specified date (22 July 2024), but the time period for filing further appeals before higher appellate authorities remains open.
"Restoring and strengthening dispute resolution mechanisms like the Income-tax Settlement Commission is critical for fostering a transparent, investor-friendly environment in the real estate sector. Coupled with rationalized taxation policies, these reforms will catalyze sustainable growth, boost housing affordability, and accelerate India’s journey towards becoming a truly developed economy by 2047." said Niranjan Hiranandani, Chairman, NAREDCO.
Among other suggestions to boost income of the people and enterprises and thereby lifting housing demand across the country, NAREDCO recommended that the rate of tax, including surcharge and cess, for all non-corporate entities should be brought down to 25%. Further, the tax rates for individuals should be reduced, to a maximum level of 30%, including surcharge and cess.
The recommendations gain significance as the real estate sector comprises about 8% of India's GDP and is the second largest employer after agriculture with about 19% of the country's total workforce.
In order to promote affordable housing, government through the Finance Bill 2021 allowed deduction under section 80 IBA of IT Act 1961 ( Section 142 of IT Act 2025) to such rental housing project which is notified by the central government in the official gazette and fulfils such conditions as specified in the said notification.
In line with the government's 'Housing For All' vision, NAREDCO has recommended remove the condition of notification by the central government. This, it said would incentivized developers in the rental housing space.
NAREDCO will also host an Urban and Real Estate Development Conclave 2026, on 13–14 February 2026 at Yashobhoomi, New Delhi, in collaboration with AIFORERA and KPMG. The two-day conclave will bring together government leaders, policymakers, industry stakeholders and investors to deliberate on India’s urban and real estate future, with discussions spanning transit-oriented development, rental housing, sustainable redevelopment, RERA reforms, regulatory alignment, institutional investments, digitisation and the sector’s role in achieving the vision of Viksit Bharat 2047.
“It is suggested that the deduction on account of interest payment available under Section 22 of IT Act 2025 should be made applicable from the year in which capital was borrowed as for principal u/s 80C and should be to the extent of full interest paid, at least in respect of one house," NAREDCO said in its recommendations to the Union Ministry of Finance.
The limit of Rs 2 lakh should be raised to Rs 5 lakh or more for owner occupied houses. Also, five years period for acquisition completion from the year of borrowing should be dispensed with.
“The real estate sector plays a critical role in India’s economic growth, employment generation and urban transformation. Rationalising taxation, especially on housing finance, will directly stimulate end-user demand, provide much-needed impetus to a sector grappling with a significant housing shortage, and offer relief to homebuyers impacted by project delays arising from cash flow constraints, while restoring overall buyer confidence,” said Parveen Jain, President, NAREDCO.
Currently, under Section 24(b) of IT Act 1961 (Section 22 of IT Act 2025), deduction on account of interest payment on housing loans is permissible to owners of rented dwelling units to the fullest extent. In case of owner occupied houses the limit is set at Rs 2 lakh. Further, the deduction is available after acquisition or construction is completed within five years from the end of the financial year in which capital was borrowed.
NAREDCO has also suggested the reinstatement of the Income-tax Settlement Commission. The commission established in 1976 to provide taxpayers a one-time opportunity to enter into a compromise and settlement arrangement with the Income-tax Authority to grant them relief from penalties and prosecution, was discontinued with effective from February 1, 2021.
The apex housing sector body said that the current dispute resolution scheme excludes certain specific cases including cases where lower appellate authorities disposed of the appeal prior to the specified date (22 July 2024), but the time period for filing further appeals before higher appellate authorities remains open.
"Restoring and strengthening dispute resolution mechanisms like the Income-tax Settlement Commission is critical for fostering a transparent, investor-friendly environment in the real estate sector. Coupled with rationalized taxation policies, these reforms will catalyze sustainable growth, boost housing affordability, and accelerate India’s journey towards becoming a truly developed economy by 2047." said Niranjan Hiranandani, Chairman, NAREDCO.
Among other suggestions to boost income of the people and enterprises and thereby lifting housing demand across the country, NAREDCO recommended that the rate of tax, including surcharge and cess, for all non-corporate entities should be brought down to 25%. Further, the tax rates for individuals should be reduced, to a maximum level of 30%, including surcharge and cess.
The recommendations gain significance as the real estate sector comprises about 8% of India's GDP and is the second largest employer after agriculture with about 19% of the country's total workforce.
In order to promote affordable housing, government through the Finance Bill 2021 allowed deduction under section 80 IBA of IT Act 1961 ( Section 142 of IT Act 2025) to such rental housing project which is notified by the central government in the official gazette and fulfils such conditions as specified in the said notification.
In line with the government's 'Housing For All' vision, NAREDCO has recommended remove the condition of notification by the central government. This, it said would incentivized developers in the rental housing space.
NAREDCO will also host an Urban and Real Estate Development Conclave 2026, on 13–14 February 2026 at Yashobhoomi, New Delhi, in collaboration with AIFORERA and KPMG. The two-day conclave will bring together government leaders, policymakers, industry stakeholders and investors to deliberate on India’s urban and real estate future, with discussions spanning transit-oriented development, rental housing, sustainable redevelopment, RERA reforms, regulatory alignment, institutional investments, digitisation and the sector’s role in achieving the vision of Viksit Bharat 2047.
