Home loan, interest savings? – P. Chidambaram’s reply to the central government

New Delhi: Union Finance Secretary TV Somanathan gave an interview to ‘The Hindu’ about the Union Budget presented in the Parliament last week. In that interview, he explained the difference between the new and old income tax systems.

He then said, “The idea that the old tax system encourages saving is not correct. In this mode only 50% of tax exempt species are saved. Certain species including tax-deductible home loan and interest thereon cannot be considered as savings,” he said.

Senior Congress leader and former Union Finance Minister P. Chidambaram said yesterday: “The Union Finance Department Secretary Somanathan has said that the house loan and the interest on it cannot be considered as savings. A portion of the installment cost is the home loan and the interest paid on it. While this expense later turns into an asset. So this is also savings. Let’s say you spend it perhaps on a trip or a horse race. It does not ultimately become an asset. Therefore, the Finance Secretary should re-examine the notion that home loan is not savings. He said this.