Economic booster for Middle class people

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Cash Flow Infusion that will work as
Economic Booster for Indian Economy post
Covid 2019 through Individual Assessees
availing Housing Loan EMI
Financial relief to Income tax Assessee in bracket of Rs 10
Lakhs and above during AY 2017-2018 who were earlier claiming benefit of Loss from House property on rented property on actuals, were restricted to the maximum loss from House property to Rs Two Lakhs only vide Budget 2017 thereby leaving lesser cash outlow with them to use
them for other purposes.
The Finance Minister should re-introduce that loss from House property to the maximum ceiling of Rs 10 Lakhs for AY 2021-2022 post Covid 2019 pandemic and onwards in order to infuse more Cash into the system that will inspire the individuals to spend that money on their various types of luxury needs i.e. in different sectors like automobile, hospitality, aviation, luxury items and petroleum, restaurants and hotels.
Assuming that this benefit of interest on housing loan is availed by 30 Lakhs of individual assesses for Rs 10 Lakhs, this will result in tax saving of Rs 72,000 crores to the tax payer and financial burden to the exchequer.

This tax saving of Rs 72,000 crores (3.6% of Economic package of Rs 20000 crores) is likely to be spent by individuals, forming part of middle class assesses on various types of luxury needs i.e. in different sectors like automobile, hospitality, aviation, luxury items and petroleum, restaurants and hotels and the individuals will pay various types of indirect taxes like state luxury tax on wine, vat on petroleum and GST on cars, hotels, air tickets and costly watches, apparels and gift items that is also likely to provide approx indirect tax collection of Rs 36,000 crores, thus the net cash flow burden on govt exchequer will be approx Rs 36,000 crores that will only be 1.8% of Rs 20 Lakh crores packages declared by Hon’ble FM of India on 15th May, 2020.
The detailed calculation is given below:-
HOUSING LOAN INTEREST REBATE TO BE INCREASED FROM EXISTING LIMIT OF RS 2 LAKHS TO RS 10 LAKHS
Amount in Rs
Tax Benefit and Tax Forego at Maxmimum Tax rate
Rs in Crores
No of Assessees In Bracket of Above Rs 10 Lakhs Taxable Income
3,000,000.00
Existing Housing Loan interest rebate
200,000.00
60,000.00
Proposed Housing Loan interest rebate
1,000,000.00
300,000.00
Tax saving to the individual assessee per annum
240,000.00

No of Assessees In Bracket of Above Rs 10 Lakhs Taxable Income (Based on Income range wise count of AY 2019-2020 taken from Income Tax E- filing Web-site)
3,000,000.00
Total Income tax forgone in AY 2021- 2022
720,000,000,000.00
72000.00
Percentage Contribution to the salaried assessee claiming Housing Loan Interest out of Financial Package released by FM, India
3.60
Financial package released by FM, India
20,000,000,000,000.00
2,000,000.00
Amount will/might be spent in below heads as below:-
Wines and Other Expenses on Luxuries
360,000,000,000.00
252,000,000,000.00
Luxury Cars-GST and TCS Plus Road Tax and Insurance
216,000,000,000.00
69,120,000,000.00
Foreign Travel and shoppings like watches and jewelleries
72,000,000,000.00
20,160,000,000.00
Domestic Travel and Hotels-Fuel purchase, Restaurants and Cab services
72,000,000,000.00
18,000,000,000.00
Total Indirect tax may be retrieved in AY 2021-2022
720,000,000,000.00
359,280,000,000.00
35928.00
Percentage Contribution compensated by Indirect tax collection out of Financial Package released by FM, India
1.80
Total Finaical burden to be borne by Govt of India by way of increasing Housing Loan interest limit from Rs 2 Lakh to Rs 10 Lakh
Percentage Contribution to be borne by Govt of India out of Financial
360,720,000,000.00
36072.00
Package released by FM, India
1.80
August-2019
Category and Income Range Wise filing count for current Financial Year

Category
Range3
Range4
Range5
Range6
Individual
2760750
1003672
165268
72,622
Total
2813176
1023513
171805
80,776
4,002,312
Range1 => Up to ₹500000 Range2 => ₹500001 - ₹1000000 Range3 => ₹1000001 - ₹2000000 Range4 => ₹2000001 - ₹5000000 Range5 => ₹5000001 - ₹10000000 Range6 => Above ₹10000000
Category and Income Range Wise filing count for current Financial Year
March-2020
Category
Range3
Range4
Range5
Range6
Individual
3252037
1249091
230163
111939
Total
3402441
1357976
283984
190221
4843230
Range1 => Up to ₹500000 Range2 => ₹500001 - ₹1000000 Range3 => ₹1000001 - ₹2000000 Range4 => ₹2000001 - ₹5000000 Range5 => ₹5000001 - ₹10000000 Range6 => Above ₹10000000
The author is a chartered Accountant and the views expressed above are his own and he can be reached at Govind.sakshigopal@gmail.com.