Section 71(3A) of the Income Tax Act deals with the set-off of losses arising under the head "Income from House Property" against any other head of income. As per the current provisions, this set-off is restricted to a maximum of Rs 2,00,000 and any unabsorbed loss can be carried forward for up to 8 assessment years.
This provision has come under scrutiny as it may have a negative impact on middle and lower class people who invest in property by obtaining loans from banks. The interest paid on these loans is often higher than the rental income earned, making it difficult for individuals to set off the loss against other income.
Additionally, this restriction on set-off of losses may not promote the development of housing projects, which was a key focus of the Finance Minister's budget speech. The carry forward of unabsorbed losses for a period of 8 years may also not be practical as the interest cost is often very high, making it unlikely for any positive income to be generated.
In light of these concerns, it is suggested that the amendment to section 71(3A) be withdrawn. Alternatively, the limit of Rs 2 lakhs may be raised to at least Rs 5 lakhs to provide some relief to individuals who have invested in property through loans. This would encourage the development of housing projects and provide some motivation for people to invest in the real estate.