Houseowners have received a significant boost from the Budget as they can now claim nil tax on two self-occupied properties, instead of one earlier. With the finance minister proposing to provide the tax relief without conditions, and increasing the threshold limit of tax deducted at source (TDS) on house rent from Rs 2.4 lakh to Rs 6 lakh — a whopping 150% increase — the inclination to own properties may grow manifold, said industry experts.
While the first measure is expected to encourage taxpayers to purchase more than one house, increasing the limit for TDS on rent is expected to reduce the tax compliance burden.
Currently, taxpayers can claim the annual value of self-occupied properties as nil only on fulfilment of certain conditions. “Considering the difficulties faced by taxpayers, it is proposed to allow the benefit of two such self-occupied properties without any condition,” Sitharaman said.
Developers and consultants said the move will boost investments in property. “Allowing rental income relief for up to two self-occupied properties without attributing any notional rent will incentivise property investments and portfolio building,” said Sunil Pareek, executive director at Assetz Property Group.
Earlier, house owners had to pay tax on the notional rental income of a second home. “This step minimises tax pressures, promotes homeownership and facilitates real estate investment, especially in second homes and Tier II and III cities, said Anuj Puri, chairman at Anarock Property Consultants.
Middle-class homebuyers, landlords and investors can now benefit from reduced tax liabilities, better affordability and fewer compliance hassles, Puri said, adding that by simplifying financial constraints and tax rules, the Budget has made property ownership and rental housing more accessible.
Kaushal Agarwal, co-founder and director of The Guardians Real Estate Advisory, said the change simplifies tax compliance and recognises the need for housing flexibility, especially for families with homes in different cities for work, investment or personal reasons. “The move to reduce tax liabilities is expected to boost homeownership and drive real estate demand, particularly in Tier II and III cities.”
Gulam Zia, senior executive director at Knight Frank, said the move will encourage people to look at more rental income without worrying about tax implications. “More inventory will come into the rental market.”
Higher TDS threshold
In the Budget speech, Sitharaman said the move to increase the annual limit for TDS on rent from Rs 2.40 lakh to Rs 6 lakh will reduce the number of such transactions, thus benefitting small tax payers.
The simplified TDS on rent decreases the compliance burden and enhances liquidity for landlords. It will boost the rental housing market, especially in metro cities, Puri of Anarock said.
Pareek of Assetz group said with rentals going up across the country, this is a welcome step. “These measures, along with putting more money in hands of people through direct tax relief, will add their bit to the resilient housing market.”
Real estate stocks gained sharply, making the BSE realty the top gainer among the sectoral indices. Anantraj (up 6.60%), Phoenix Mills (5.96%) and Macrotech (5.06%) were among major gainers in the realty pack. “Real estate companies are likely to get more fillip after Budget announcements,” said an analyst who did not want to be named.