Holding Inventories Might Become an Expensive Affair for the Developers
Jan 08, 2018 Real Estate News
As per the media reports, the developers who have been holding their unsold inventories for more than a year might have to shell out 8 to 10 percent of the property value as tax from the next financial year. Till now, the developers were not paying any kind of taxes for the inventories that they were holding.
According to Section 22 of the IT Act, a house property is which is not occupied by the owner becomes taxable. It does not matter whether a property is occupied or vacant; the owner is liable to pay the tax. But the section 22 does not consider that property which is used for the business purpose or profession. Properties used for commercial purpose comes under the head of ‘Income from Business and Profession’.
As per the income tax laws, properties including flats, farm houses, office space, shops, agricultural land and factory sheds are considered under ‘house property’. On the same line, their annual value is taxed under ‘Income from House Property’.
As quoted in Business Standard an I-T official stated that “We are assessing the pan-Indian real estate data of unsold flats, which have been kept for more than a year. The tax department is taking the stocks of state-wise unsold inventories, which could fall under the new tax regime.”
How will this move impact?
With this step on the roll, the government in a way is forcing developers to end the artificial supply of the housing in the market. So developers now would put in all their efforts to sell their existing stocks. And this could be another way to get rid of this new tax regime as if they could sell their holding inventories that would not have to pay extra tax.
In terms of home buyers, this might be a good opportunity to choose from ample of options at much more reasonable rates.
But if we look at it from a different angle, we see that so far developers were not able to sell their inventories due to some genuine factors would also have to suffer now. This increased tax value would be an added tax liability for the developers and might force the developers to go for a distress sale. This could cause a major financial damage for the developer.
Hence, now it’s time to watch, how and when the government implement this tax regime and how the real estate market actually reacts. It would be better than the developers gear up and start putting up all effort to sell their stocks.
According to Section 22 of the IT Act, a house property is which is not occupied by the owner becomes taxable. It does not matter whether a property is occupied or vacant; the owner is liable to pay the tax. But the section 22 does not consider that property which is used for the business purpose or profession. Properties used for commercial purpose comes under the head of ‘Income from Business and Profession’.
As per the income tax laws, properties including flats, farm houses, office space, shops, agricultural land and factory sheds are considered under ‘house property’. On the same line, their annual value is taxed under ‘Income from House Property’.
As quoted in Business Standard an I-T official stated that “We are assessing the pan-Indian real estate data of unsold flats, which have been kept for more than a year. The tax department is taking the stocks of state-wise unsold inventories, which could fall under the new tax regime.”
How will this move impact?
With this step on the roll, the government in a way is forcing developers to end the artificial supply of the housing in the market. So developers now would put in all their efforts to sell their existing stocks. And this could be another way to get rid of this new tax regime as if they could sell their holding inventories that would not have to pay extra tax.
In terms of home buyers, this might be a good opportunity to choose from ample of options at much more reasonable rates.
But if we look at it from a different angle, we see that so far developers were not able to sell their inventories due to some genuine factors would also have to suffer now. This increased tax value would be an added tax liability for the developers and might force the developers to go for a distress sale. This could cause a major financial damage for the developer.
Hence, now it’s time to watch, how and when the government implement this tax regime and how the real estate market actually reacts. It would be better than the developers gear up and start putting up all effort to sell their stocks.
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