Along with the really sector, homebuyers too had big expectations from the Union Budget 2017 as they believed that their dream homes were still beyond their reach and even tax incentives on home loans were inadequate. Keeping their expectations in view, Finance Minister Arun Jaitley has focused on affordable housing apart from some other key areas in this budget. He has also given infrastructure status to affordable housing. There are several other benefits for real estate developers and builders, and also for homeowners.
Here we are taking a look at some of the key benefits:
Long-term holding is now 2 years
Long-term holding for land and buildings has been reduced to 2 years from 3 years currently. This will result in faster disposal, encouraging the mobility of assets. It will boost the real estate sector and make it more attractive to investors. This change will take effect from 1st April, 2018.
Base year is now 2001
Base year for indexation for all long-term assets (including land/building) will now be 2001 and not 1981. The cost of assets purchased before 01.04.2001 will be computed based on the fair market value on 1st April, 2001. Only those capital expenses which were incurred after 01.04.2001 will be included in the cost of improvement.
“Taxpayers faced genuine difficulties in computing the capital gains with respect to assets, especially land/building, acquired before 01.04.1981. This was on account of the non-availability of information for market value on 01.04.1981. This move will greatly benefit taxpayers, and will take effect from 1st April, 2018,” says Archit Gupta, Founder & CEO, ClearTax.com.
Long-term bonds to reduce capital gains
The government will notify more long-term bonds (U/s 54EC) where taxpayers can invest their capital gains and enjoy exemptions on capital gains. Currently, only investments in bonds issued by the National Highways Authority of India or by the Rural Electrification Corporation Limited are eligible. This will bring more scope for people to save taxes.
First-time home buyers
Bad news for first-time home buyers. The additional Rs 50,000 deduction on home loan interest (sec 80EE) given in 2016 is now no longer available.
“So first-time home buyers can claim only Rs. 2 lakh (for self-occupied homes) as deduction u/s 24(b) for home loan interest along with other homeowners,” says Gupta.
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House property loss setoff limited to only Rs 2 lakh
Rental income is a huge source of income for many people. Many people invest their additional funds in second homes for appreciation in value and also maintain a steady source of income through rent.
“Owners of such rental properties have no limit for deduction of home loan interest u/s 24(b). They can deduct the entire interest on home loan. This often results in house property loss. This loss could be set-off up to any limit against any income. Now only Rs. 2 lakh can be set off. (This will be in effect from 1st April, 2018),” says Gupta.
For e.g., if you have a house property loss of Rs 11 lakh, you can set off only Rs 2 lakh this year. The remaining Rs 9 lakh will be carried forward for 8 assessment years.
TDS on rent more than 50,000 pm
If you pay more than 50,000 per month as rent, you will have to deduct TDS @ 5%. This is applicable to all, whether or not you are subject to tax audit u/s 44AB.
“However, you will only need to deduct TDS once during the year. You also do not have to obtain the Tax Deduction Account Number (TAN) for this. This change will take effect from 1st June, 2017,” informs Gupta.
Focus on affordable housing
Keeping in view the Prime Minister’s ‘Housing for All’ scheme, FM Arun Jaitley has also focused on affordable housing, bringing in much-needed relief to the common man.