Budget 2018: The date for the last full Budget of the present government is around the corner and many suggestions are being given to Finance Minister Arun Jaitley by various stakeholders. Leading property consultant JLL has suggested additional tax incentives to first time home buyers in the upcoming Budget 2018. Arun Jaitley will present the Union Budget 2018 on February 1.
JLL has said that the incentives will boost sluggish housing demand and will open up opportunities for faster development and greater private participation. The current provision is for an additional tax deduction of
up to Rs 50,000 per financial year under section 80EE of the Income Tax Act. JLL India CEO and Country Head Ramesh Nair said in a report, “The bracket should be increased (in Budget 2018) up to 1 Rs lakh to incentivise first-time home buyers. This deduction is over and above the Rs 2 lakh limit under section 24 of the Income Tax Act.”
The government should consider convincing the states to exempt REITs from stamp duty, at least for the initial few years, to increase their competitiveness, Ramesh Nair added. The Federation of Indian Chambers of Commerce and Industry (FICCI) also suggested some incentives for the homebuyers in the Union Budget 2018. FICCI said that deduction available under section 24 of the act is to a maximum limit of Rs 2,00,000 per annum. It is “recommended the exemption should be increased to at least Rs 3,00,000 per annum” in the Budget 2018.
On the delay of property construction, FICCI suggested Arun Jaitley that the section 24 of the Act be amended to provide for a separate deduction so that the preconstruction interest is allowed in five instalments without any threshold limit in the Budget 2018. A similar amendment is also required in sub-section 3A of section 71 of the Act to allow set off of loss from house property in excess of Rs 200,000 to the extent the excess amount represents pre-construction interest.
“Currently, interest paid on home loan during the period of construction is allowed as the deduction in five yearly instalments starting from the year in which the construction is completed and the taxpayer claims possession of the property. Often completion of construction of the property is delayed due to extraneous reasons not entirely within the control of the taxpayers,” FICCI said in its Budget 2018 Memorandum.
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The National Real Estate Development Council (NAREDCO) expects that in the Budget 2018, the government should bring under construction houses under the GST tax rate of 12%. As of now, the housing under construction falls under 18% tax rate. The suggestion by NAREDCO will bring tax rate at the level of around 6% of the property cost.
These moves are expected to give a big boost to Narendra Modi’s dream of “Housing for all by 2022” project. The project was given approval in June 2015, by the Union Cabinet, with an aim of rehabilitation of slum dwellers with participation of private developers using land as a resource; promotion of affordable housing for weaker section through credit linked subsidy; affordable housing in partnership with public and private sectors; and subsidy for beneficiary-led individual house construction or enhancement. In 2017, the landmark Real Estate Act (RERA) came into force with a promise of protecting the rights of consumers and ushering in transparency.