The Cabinet decided Tuesday to modify and extend the tax break on home loans for 21/2 more years starting in fiscal 2001, a move expected to be worth 941 billion yen to prospective home owners.

The break is part of 1.24 trillion yen in pump-priming tax cuts designed to increase housing starts and fire up consumer demand.

The current tax break, which returns up to 5.87 million yen per mortgage holder in installments over 15 years, is set to expire on June 30.

The extension, however, will offer tax breaks of up to 5 million yen on mortgages through installments over 10 years, starting July 1, government officials said.

The overall annual size of the proposed cutbacks under the plan exceed the corresponding figure of 972 billion yen for the current fiscal year.

But the overall size of the tax cuts for fiscal 2001, which starts April 1, will only amount to 193.5 billion yen because the discounted mortgage can only be applied to taxpayers who buy and "actually move into" new homes after July 1.

As a result, mortgage-related tax breaks in fiscal 2001 will total only 4 billion yen, as it will take several months before a taxpayer signs a contract to buy a home and move in.

In the period from fiscal 2002 through Dec. 31, 2003, however, the combined size of tax breaks for mortgage takers will balloon to 941 billion yen per year because the benefits of the new tax break regime can be reaped by home buyers throughout the period, the officials said.

The tax cut plan was originally endorsed by a team of tax experts from the ruling coalition last month.

The government plans to submit a bill for the tax cut plan to a regular Diet session convening later this month. with an eye to pushing the legislation through the Diet by the end of March, they said.

The tax plan also calls for cutting back on levies on corporations and individuals.

The corporate tax cutback will take effect on April 1, and individual tax breaks will be retroactive to Jan. 1, they said.