Now, those who stay in rented houses in any city can get a maximum tax rebate of Rs 60,000 per annum from the existing Rs 24,000 under Section 80GG of the Income-Tax Act. Also, in order to boost demand in the flagging realty sector, Finance Minister Arun Jaitley on Monday proposed an additional Rs 50,000 deduction on interest on loans for first-home buyers and tax incentives on development of affordable housing.
In a relief to individual tax payers, Jaitley raised the maximum deduction to those who are not salaried employees or do not receive House Rent Allowance (HRA) as part of their salary.
However, salaried individuals who get HRA as part of their salary and claim deduction of rent paid from salary income under Section 10 are not affected by this proposed change in the tax law.
listing promotion of affordable housing as one of the thrust areas, Jaitley in his Budget speech said, “For first-time home buyers I propose to give deduction of additional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned during the next financial year, provided the value of the house does not exceed Rs 50 lakh.”
At present, Rs 2,00,000 deduction is allowed for interest paid on home loans.
The Government also exempted from Service Tax construction of affordable houses up to 60 sq metres under any scheme of the Central or State Government including PPP schemes.
The real estate sector, particularly the housing segment is facing a huge slowdown for the last 2-3 years, resulting in a huge delay in delivery of projects to customers and piling up of unsold inventories.
To boost supply of affordable homes, Jaitley proposed 100 per cent deduction for profits to an undertaking from a housing project for flats up to 30 sq metres in four metros and 60 sq metres in other cities.
Given Jaitley’s measures for the housing sector, realtors are hopeful that the affordable housing sector is going in the right direction.
“We propose a 100 per cent tax deduction to undertakings for construction of affordable housing and Service Tax exemption for construction of affordable housing up to 60 square metres, under State and Central housing schemes,” said Gaurav Jain, Managing Director and CEO, Jindal Realty.
As far as the deduction in the Budget is concerned, it would be applicable on the projects approved from June 2016 to March 2019, and completed within three years of the approval. Minimum Alternate Tax will, however, apply to these undertakings.
“Pradhan Mantri Awas Yojna embodies the assurance of the Government to address the housing needs of all and more specifically the poor, in a time-bound manner. Construction of houses creates considerable employment opportunities as well,” the Finance Minister observed.
The Government also exempted Real Estate Investment Trusts (REITs) from Dividend Distribution Tax.
“Another proposal to stimulate housing activity is to facilitate investments in REITs. I propose that any distribution made out of income of Special Purpose Vehicle to the REITs and Infrastructure Investment Trusts having specified shareholding will not be subjected to Dividend Distribution Tax,” Jaitley said.
He also extended excise duty exemption, currently available to concrete mix manufactured on-site for use in construction work to ready-mix concrete.