Budget 2019: More Relief To Residential Houses

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By Rohit Sharma


The interim Budget 2019-20 presented by Union Minister for Finance, Corporate Affairs, Railways & Coal, Piyush Goyal today, has provided relief to residential houses and middle class. It has been proposed to exempt the levy of income tax on notional rent on a second self-occupied house.  Currently, income tax on notional rent is payable if one has more than one self-occupied house. Goyal announced the relief considering the difficulty of the middle class having to maintain families at two locations on account of their job, children’s education, care of parents etc.

Further, the minister proposed to increase the benefit of rollover of capital gains under Section 54 of the Income Tax Act from investment in one residential house to two residential houses for a taxpayer having capital gains up to Rs 2 crore. This benefit can be availed once in a lifetime.  For making more homes available under affordable housing, the benefits under Section 80-IBA of the Income Tax Act is being extended for one more year, i.e., to the housing projects approved till  March 31, 2020.  Also, for giving impetus to the real estate sector, the Finance Minister proposed to extend the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year in which the project is completed.

Individual taxpayers having taxable annual income up to  Rs 5 lakh will get a full tax rebate and therefore will not be required to pay any income tax, said Goyal. “Because of major tax reforms undertaken by us during last four and half years, both tax collections, as well as a tax base, have shown a significant increase, achieving a moderate taxation- high compliance regime.  It is, therefore, just and fair that some benefits from the tax reforms must also be passed on to the middle-class taxpayers”, he added.

As a result, the FM added that even persons having gross income up to Rs 6.50 lakhs may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc. In fact, with additional deductions such as interest on a home loan up to Rs 2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure on senior citizens etc, persons having even higher income will not have to pay any tax. This will provide a tax benefit of  Rs 18,500 crore to an estimated 3 crore middle-class taxpayers comprising self-employed, small business, small traders, salary earners, pensioners and senior citizens.

“The Interim Budget 2019 has remained focused on the nation’s economic growth and brings a positive sentiment in the real-estate industry. The government’s initiative to reduce the GST burden on the taxpayer coupled with tax rebates on incomes up to INR 5 lakh will help improve the purchasing power of individuals. Moreover, the decision to ensure a competent system to impose and collect stamp duties at one place helps in streamlining and creating an efficient structure within the industry…. This year’s budget has laid the foundation for the performance of real estate sector in terms of boosting the economic growth and also enhancing the infrastructural development”, said  Sanjay Dutt, MD & CEO, Tata Realty Limited

The tax rebate announced by the Minister is only a proposal right now, it can’t be passed until the July budget under whichever government comes to power.

According to Khushru Jijina, Managing Director, Piramal Capital & Housing Finance, “The Interim Budget for FY20 aims at a fine balance between the upliftment of the rural economy as well as incentivizing the high spending urban middle class. The budgetary provisions for India’s rising middle class are expected to stimulate demand and help attain the targeted economic growth. Budgetary outlays aimed at the real estate sector are encouraging for the sector.  Additionally, the real estate developers would be benefited by the extension of the exemption period for levying the tax on unsold inventories at a time when the sector is undergoing liquidity stress. Also, we expect a favourable decision from the GST council overseeing ways of normalizing the tax’s impact on developers as well as end consumers.”

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