The real estate sector, which has been grappling with low growth over the last few years, has received some good news in the interim Budget 2019 that was announced today. Interim finance minister Piyush Goyal proposed a series of changes that would boost the activity in the real estate sector.
Affordable housing segment will be a big beneficiary of these changes.
Key changes proposed in the interim budget today:
1) It was 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. Real estate projects take more time to sell all the inventories. This change will add to developers’ gains.
2) 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 31st March, 2020. (Under this section, if the project is not completed within three years from the date of approval, the profits which were allowed as deduction under this section shall be deemed to profits of the year in which such time limit of completion expires. Now it has been extended by one more year.)
3) Currently, income tax on notional rent is payable if one has more than one self-occupied house. 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. it has been proposed to exempt levy of income tax on notional rent on a second self-occupied house.
4) TDS threshold on interest earned on bank/post office deposits is being raised from Rs 10,000 to Rs 40,000. This will benefit small depositors and nonworking spouses. Further, the TDS threshold for deduction of tax on rent is proposed to be increased from Rs 1,80,000 to Rs 2,40,000 for providing relief to small taxpayers.
5) The benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a tax payer having capital gains up to Rs 2 crore. This benefit can be availed once in a life time.
In addition to the above changes that have direct impact on real estate sector, the other proposals like tax rebate to individual taxpayers having annual taxable income of Rs 5 lakh and increase in standard deduction amount from Rs 40,000 to Rs 50,000 for salaried employee will leave investors with more cash in hand. Higher disposable income coupled with above benefits will boost growth in affordable housing segment where the loan amounts are typically lesser around Rs 10 lakh.