India Union Finance Ministry might be considering increasing the exemption limit for interest on housing loans to the level of to Rs 3 lakh annually from the existing limit of Rs 1.5 lakh in the upcoming budget.

The move will bring some relief to millions of people who pay interest on their home loans. At present, the government allows a deduction of up to Rs 1.5 lakh from taxable income towards interest on home loans in the country. The borrowers can also take the benefit of exemption on the principal amount paid.

The proposal to increase the exemption limit will not only give a much needed boost to the realty sector in the country but also increase disposable income with the consumers allowing them to increase expenditure and savings in the wider economy.

Menwhile, A parliamentary standing committee on finance headed by Yashwant Sinha is expected to finalise a report on the Code Bill that is expected to replace the income tax law.

The new draft proposal of the regulation suggests increasing the income tax exemption limit to Rs 3 lakh a year against Rs 2 lakh proposed in the Bill. However, The central government is likely to offer some relief to the individual tax payers and might raise the exemption limit to Rs 2 lakh within the Direct Taxes Code (DTC) and hike slabs for different tax brackets in the upcoming Budget 2012-13.

The budget will be tabled in Parliament on 16 March this year.