Tax Exempt 2nd House

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Govt extends tax sops for affordable home

developers; announces incentives for
second home buyers
PTI | Feb 1, 2019, 07.19 PM IST
New Delhi, Feb 1 () To give impetus to the sluggish housing sector, the government Friday
proposed many tax sops to incentives purchase of second homes, and also announced
relief for realty firms by extending tax rebate on development of affordable housing until next
fiscal and not charging tax for two years on notional rent of unsold units.
While presenting the interim budget for 2019-20, Finance Minister Piyush Goyal proposed
many incentives to individuals tax payers that would have positive impact on the real estate
sector, which is facing a multi-year demand slowdown.
The government announced that capital gains of up to Rs 2 crore could be rolled over
for investment in two housing units from the current one unit only.
It also exempted tax on notional rent on a second self-occupied house. The tax
deducted at source (TDS) threshold for deduction of tax on rent has been proposed
to be increased from Rs 1,80,000 to Rs 2,40,000 for providing relief to small
taxpayers.
For developers, Goyal said benefits under Section 80-IBA of the Income Tax Act are being
extended for one more year to housing projects approved till March next year. This proposal
would boost supply of affordable housing.
Under Section 80-IBA, 100 per cent deduction of profits is being provided to an assessee
engaged in developing and building affordable housing projects subject to certain conditions
related to carpet area among others.
To give 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. The period would be counted from the end of the year in which the project gets
completed.
According to property consultants, there are about 6-7 lakh of unsold units with real estate
developers in seven-eight major cities because of poor demand. This proposal will give a
relief to those developers holding unsold units.
Goyal further said that the benefit of rollover of capital gains up to Rs 2 crore under
section 54 of the IT Act would now be available for investment in two houses from the
present only one residential unit. This benefit can be availed once in a life time.
It also exempted tax on notional rent on a second self-occupied house. The tax
deducted at source (TDS) threshold for deduction of tax on rent has been proposed
to be increased from Rs 1,80,000 to Rs 2,40,000 for providing relief to small
taxpayers.
"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. I am proposing to exempt levy of income tax on notional rent on a second self-
occupied house," the finance minister said.
Reacting on the Budget proposals, property developers and consultants said the proposals
would boost housing supply-demand, leading to a revival of the real estate sector. However,
they said that stressed fund was not created for stalled projects.
On the demand from real estate sector to cut GST rates, Goyal said, "Our government
wants the GST burden on home buyers to be reduced; and accordingly, we have moved the
GST Council to appoint a group of ministers to examine and make recommendations in this
regard at the earliest".
At present, GST on under-construction houses is 12 per cent and 8 per cent for affordable
homes. There is no GST on completed housing units if the developer has received
occupancy certificate.
Goyal also highlighted that the real estate sector is becoming transparent after the passage
of two legislations -- the Real Estate (Regulation and Development) Act, 2016 (RERA) and
Benami Transaction (Prohibition) Act, 1988.
The Section 80-IBA was introduced in 2016 Budget and then amended in the 2017 Budget,
by relaxing the condition of period of completion of the project for claiming deduction to five
years from earlier three years. The size of units should be 30 square metre carpet area in
case of municipal limits of four metropolitan cities while for the rest of the country, including
in the peripheral areas of metros, limit of 60 square metre applies.

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Govt extends tax sops for affordable home

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