Benefits for Real Estate from Budget :
As per Naredco – the Real estate body, the realty sector is facing a ‘crisis’ and expects the government to support by intervening in the Realty sector by infusing Rs 2000 crores in stressed asset fund in order to start construction in stuck housing projects.
On the other hand, the homebuyers are also asking for support from the government since last year’s Budget. Homebuyers wanted the government to bring the entire real estate sector under the realm of GST and make sure that builders pass on the benefit of input tax credit to buyers. The demand for amending the Insolvency and Bankruptcy Code 2016 has also been made by the buyers to the Finance Ministry last year. So far, these demands have been met but builders also seek few favors and after interim budget 2019, here is what real estate gained:
Exemption on tax levied on Notional Rent
In the interim Budget 2019, Finance Minister Piyush Goyal catered to a lot of real estate demands. For giving impetus to the realty sector, the period of exemption of tax on Notional rent on unsold inventory has been increased to two years which previously was one year. The overall impact of this is high as the builders can now reduce their tax cost and the homebuyers can benefit from it largely.
Tax Exemption applicable on second self-occupied house
Earlier, the tax exemption was applicable on only one self occupied house property. Now the tax exemption on notional income from self occupied house property increased for up to two properties. Considering the middle class challenges wherein they have to maintain families at two different locations for job, education or for the care of parents, the Finance Minister have proposed to exempt tax in notional rent on a second self-occupied house. However, the cumulative limit of tax deduction for interest paid remains unchanged.
Change in TDS limit for Rent
There is a change in the TDS limit for Rent in this Budget which will impact the small taxpayers by reducing their compliance. The earlier limit for Tax Deduction on rent paid was 180,000 which has now been increased to 2,40,000 in 2019. I will certainly benefit the middle class and small taxpayers in the long term if the proposal comes into play.
Changes in Capital Gain Section 54
Currently, the long term capital gain on sale of a residential house is exempted from tax deductions if the money gained in reinvested in purchase/ acquisition of another (one or single) residential house. In the interim Budget 2019, it has been proposed that the proceeds gained from the sale of residential property can now be reinvested in two houses provided that the capital gain does not exceed Rs 2 crore and the benefits of this option can only be availed once in a lifetime.
Deduction of profits from affordable housing project
For making more homes available under affordable housing, the benefits under Section 80-IBA of Income Tax Act is being extended for one more year, i.e. to the housing projects approved till 31st March, 2020. Presently, deduction is available on profits derived from developing an affordable housing project which has received approval from Government during 1st June 2016 till 31st March 2019. This will enable developers to reduce their tax cost and the ultimate homebuyers will benefit from it.
Apart from the above mentioned benefits for Real Estate from budget 2019, Individual taxpayers having taxable annual income up to Rs 5 lakh will get full tax rebate and therefore will not be required to pay any income tax. Also, a group of ministers have been formed to work upon reducing the GST burden on homebuyers. The measures will be discussed by the group.