This month began on a happy note for both the developers and home buyers with the range of concessions announced by the Finance Minister on Feb 1. The Interim Budget 2019 was presented on this day where decisions favouring the improvement of investor sentiments and encouraging affordable housing, were taken.
What are the Major Announcements of Union Budget?
- Usually, the tax levied on notional rent for unsold inventories is exempted for a period of 1 year starting from the end of the project completion year. In this Budget, this period has been extended to 2 years by the FM.
- According to the Income Tax Act, Section 80IBA, the gains collected from affordable housing projects that got approved after June 1, 2016, are 100% deductible. This has been tweaked by FM in this Budget by extending the benefit for housing projects to be approved within 31st March, 2020.
- GST Council has been recommended by the Government, for the reduction of GST rates.
- Till now, an owner of more than 1 home that are occupied by him, is required to pay income tax on notional rent. But now onwards, the homeowner will not have to pay any income tax on the rental income. As a result, the market for second homes might improve.
- The limits of gratuity payment and standard deduction, have been stretched to 20 lakh rupees and 50,000 rupees, respectively. Besides, full tax rebate has been allowed on individual taxable income till 5 lakh rupees. This will encourage the buyers of affordable housing.
- As per Section 54 of the Income Tax Act, a taxpayer receiving capital gains of upto 2 crores from the investment in a residential house, can avail the benefit of capital gains rollover. The number of investment has been increased from 1 to 2 houses for utilizing the same benefit though just once in one’s lifetime.
The increase in TDS entry on rental income from 1.8 to 2.4 lakh rupees is expected to promote rental housing.
The Union Budget has nailed it! The modifications made in the tax payment are bent on increasing the confidence of both buyers and developers who have been struggling due to piled up inventory across the cities.
The sops announced by the Finance Minister assure home purchases popping up again with buyers entering the market again.
Elimination of tax on notional rent of a homeowner’s second property that is also occupied by him, is a fair decision to considerably uplift the market for second homes. Both capital gains and personal income have been significantly improved by the FM as against the incremental reforms in the past, which were slow.
Those affordable housing projects that have been struggling for completion due to several reasons, can now breathe easy since the time of completion for earning a tax holiday has now been extended. The Budget was as positive as expected before the elections of 2019. The proposals made for strengthening the Real Estate industry and easy living will consequently encourage the development of a 10 trillion dollar economy, as envisioned by the Indian Government.
The Interim Budget 2019 preceding the general elections this year might be disparaged by the psephologists as ‘populist’ for pleasing the voters. But the maiden speech of the officiating Finance Minister on 1st February, is music to the the years of the taxpayers.
Despite being dominated by the highlights on the Government’s work, the conclusion of the one and a half hour long speech did not disappoint the country’s taxpayers. The later part of the speech comprised the announcements, which have been elaborated here.
Who are the Gainers in the Interim Budget 2019?
The present 2.5 lakhs limit for the exemption of income tax would be doubled to 5 lakh rupees, as suggested by the Finance Minister. The bar for standard deduction has also been raised from 40,000 rupees at present to 50,000 rupees. This decision was applauded and appreciated.
Investment in insurance, provident funds or any other specified saving, will free people with gross income till 6.5 lakh rupees, from paying income tax.
As told by the Finance Minister, even people with higher income will be exempted from paying tax as a result of the additional deductions on the following:
- Interest on education loans
- Interest on home loans till the limit of 2 lakhs
- Medical expenditure for seniuor citizens and insurance
- Contributions of National Pension Scheme
The officiating Finance Minister could definitely make those landlords happy who own more than 1 property that is occupied by them. As against the payment of tax on notional rent of the second property till now, they won’t need to shell out on tax anymore in future.
In the words of the Finance Minister, the decision of exempting the notional rent of the second self-occupied home from income tax, has been taken to help the middle-class section that are required to maintain families both in their hometown and the city where they stay for employment purposes.
Section 194I of the Income Tax Act, makes TDS deduction liable for the tenants if the gross amount of rent paid in 1 financial year surpasses the limit of 1.8 lakh rupees, which was 1.2 lakhs till 2010. This year, the Budget announced an increase in this limit from the existing 1.8 lakhs to 2.4 lakhs.
Previously, the property owner was required to use the proceeds derived from selling one residential property in another one for saving on capital gains tax. But, the case is not the same now since the proceeds can be utilised in 2 properties according to the capital gains rollover benefit by Section 54. For capital gains upto 2 crores, the investment limit has been raised from 1 to 2 residential houses. But this benefit will be available just once in a lifetime.
The Government’s proposal to expand the period for which the notional rent of unsold inventories are exempted from the levy of tax, has brought great relief to the developers amidst their struggle for selling their existing stock across the major cities of the country. This period started from the end of project completion year and lasted for 1 whole year and will now onwards, for 1 year more. As stated by the Finace Minister, this move strives to invigorate the Real Estate Sector.
Previously, only those projects in the affordable housing category that will be approved by March 2019, would exempt the concerned developers’ income from the payment of tax under Section 80-IBA. But this period has been extended by a year that is March 2020.
Section 80-IBA of the Income Tax Act mentions that if the gains and profits derived from the business of housing development are included in the assessee’s gross income then the deduction of a specific amount is allowed. This amount of money equals to 100% of the gains and profits. The Finance Act, 2016 has inserted this Section into the Income Tax Act.
GST Rate Reduction
The officiating Finance Minister added the Government’s wish to reduce the burden of GST on homebuyers while stating the fact that 1.53 crore houses have been built under PMAY from 2014 to 2018. They have been able to move the GST Council for throwing light on this matter as soon as possible by appointing a GoM (Group of Ministers).
Hope, the reading was useful. Whether you want to buy a flat in Kolkata or sell one, transventor.com is there to assist you through efficient and hassle-free transaction support.