Senior Congress leader and former finance minister P Chidambaram on Sunday urged Finance Secretary T V Somanathan to "re-examine his theory" that a housing loan is not a saving.
Somanathan, in an interview with The Hindu, while talking about the old tax regime, said that if one looks at the structure of the tax deductions, half of them are for savings, and half of them are for dis-savings like housing loans or interest on housing loan.
"The Finance Secretary asks 'Is the housing loan a saving?' His answer is 'No'. I wonder how many people will agree with the Finance Secretary," Chidambaram said on Twitter.
The payment of interest and the installments of the loan is indeed an expenditure, but it is an expenditure that is converted into an asset, which is a saving, the former finance minister argued.
"Suppose you spend the same money on a holiday or at a race course: there will be no asset at the end," he said.
"The Finance Secretary should re-examine his theory that a Housing Loan is not a saving," Chidambaram said.
In his remarks as quoted in the interview, the finance secretary said, "I don't agree with the perception that the old regime encourages saving. For the simple reason, if you look at the structure of the tax deductions, half of them are for savings, and half of them are for dis-savings like housing loans or interest on housing loans. Is the housing loan a saving?"
"So overall macroeconomic impact, it's not a savings push at all but merely a push towards certain things. The government wants you to do housing, insurance, or pension. But it's not necessarily a savings push or influences the savings rate in the country," he had said.