What did Developers and Home Buyers Gain from Budget 2017?
May 24, 2017 Home Trading Steps
Deduction of Rs 2 lakhs has been available to a person who uses the house for his own residence. But, due to high loan amounts, the benefit on principal repayment for home loan taken for the residential purpose has gone waste because of overcrowding of Section 80 C by various other items like life insurance premium, tuition fee, Provident Fund, etc. For this reason, the home buyers were expecting either a separate limit for principal repayment of home loan or enhancement of the existing limit of Rs 1.5 lakhs. Unfortunately, they have been gravely disappointed in this matter.
However, the following moves by the government may please many tax payers although the average individual tax payer does not or sell homes frequently – at the most, he may buy and sell the house three or four times during his lifetime. Nevertheless, these come as a silver lining:
The finance Minister has declared the holding period for qualifying any immovable asset as ‘long term’ would be reduced from three years to two years.
A long-term capital gain is taxed at a concessional rate of tax of flat 20 percent and also qualifies for various exemptions under sections 54, 54 f and 54EC.
The tax payer can save his tax liability by investing in another residential house or in capital gains bonds of REC (Rural Electrification Corporation) or NHAI (National Highways Authority of India).
The base year to pay the tax has been proposed to be shifted by the finance Minister so that the tax payer may get an option to get the market value of the property. This will benefit many tax payers as the market price of immovable property has increased more during the period, as compared to the increase in the cost inflation index announced by the government from time to time.
Any individual, who pays any rent above Rs 50,000 in a month, will have to deduct tax at source at the rate of 5 percent of the rent, either at the time of payment or credit.
The finance minister has proposed that the loss under the head ‘Income from House Property’ shall be eligible for set off against other income, only to the extent of Rs 2 lakhs and the excess shall have to be carried forward, which can only be set off against your rental income.
However, there is a lot for the developers as well:
Infrastructure status granted to affordable housing will open the doors for easy funding at concessional rates of interest.
The unsold flats of developers have been proposed to be taxed after 1 year by the finance minister, even if the developer has not received any rent on such flats. For income tax purposes, such flats shall be treated as self-occupied and as a tax payer is allowed to have only one house property as self-occupied, so, the other flats in possession of the developer will be deemed to have been let out and thus, notional rentals will become taxable. This would force developers to dispose of the flats quickly.
However, the following moves by the government may please many tax payers although the average individual tax payer does not or sell homes frequently – at the most, he may buy and sell the house three or four times during his lifetime. Nevertheless, these come as a silver lining:
The finance Minister has declared the holding period for qualifying any immovable asset as ‘long term’ would be reduced from three years to two years.
A long-term capital gain is taxed at a concessional rate of tax of flat 20 percent and also qualifies for various exemptions under sections 54, 54 f and 54EC.
The tax payer can save his tax liability by investing in another residential house or in capital gains bonds of REC (Rural Electrification Corporation) or NHAI (National Highways Authority of India).
The base year to pay the tax has been proposed to be shifted by the finance Minister so that the tax payer may get an option to get the market value of the property. This will benefit many tax payers as the market price of immovable property has increased more during the period, as compared to the increase in the cost inflation index announced by the government from time to time.
Any individual, who pays any rent above Rs 50,000 in a month, will have to deduct tax at source at the rate of 5 percent of the rent, either at the time of payment or credit.
The finance minister has proposed that the loss under the head ‘Income from House Property’ shall be eligible for set off against other income, only to the extent of Rs 2 lakhs and the excess shall have to be carried forward, which can only be set off against your rental income.
However, there is a lot for the developers as well:
Infrastructure status granted to affordable housing will open the doors for easy funding at concessional rates of interest.
The unsold flats of developers have been proposed to be taxed after 1 year by the finance minister, even if the developer has not received any rent on such flats. For income tax purposes, such flats shall be treated as self-occupied and as a tax payer is allowed to have only one house property as self-occupied, so, the other flats in possession of the developer will be deemed to have been let out and thus, notional rentals will become taxable. This would force developers to dispose of the flats quickly.
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