Union Budget 2021-22: The budget has two proposals which intend to extend the tax benefits available to home buyers.
Extension of time limit for availing home loan to buy a house
Presently an individual is entitled to claim deduction of interest paid on a loan taken from financial institutions to buy a residential house property under Section 80EEA provided the value of the house does not exceed Rs 45 lakh as per the stamp duty valuation. This deduction was available only if the home loan was sanctioned between 1st April 2019 and 31st March 2021. Since the real estate sector is facing problem, the government has decided to extend the date beyond 31st March 2021 and now you will be able to avail this benefit for loans sanctioned by 31st March 2022.
This benefit is available provided the buyer does not have any residential house on the date of sanction of the home loan. Though one is entitled to deduction of Section under 24(b) for interest on money borrowed from any one but the benefit under Section 24(b) becomes available only if the buyer has obtained possession of the house or construction is completed in case the house is self constructed.
In contrast the deduction under Section 80EEA can be claimed even in respect of interest paid on such home loan even during the construction period. Though one is entitled to amortise the interest paid during the construction but looking at the restriction of Rs 2 lakh for self-occupied property and restriction of Rs 2 lakh of loss against other income during the year and looking at the amount of home loan nowadays required to be taken for buying property in big cities, home buyers are hardly able to claim the amortised portion of interest effectively. So this is a welcome proposal.
Rationalisation of provision for taxation of difference between stamp duty value and agreement value
If a person sells any immovable property below the stamp duty valuation the difference is taxed in his hand. Moreover, at the same time the buyer is also taxed for such difference. In order to provide the relief to cases of marginal differences the government had provided for tolerance limit of 5% between these two values in 2013, which was increased to 10% in the last budget. Since the real estate sector is in doldrums and the prices have corrected significantly during this pandemic and developers are finding it difficult to sell their houses at the stamp duty valuation, the government proposes to increase the tolerance limit to 20% but only for limited type of transactions. The transactions which will qualify for this higher tolerance limit are those where the agreement value of the property does not exceed Rs 2 crore and the property in question is a residential property being bought from the developer directly as first allotment during the period 12th November 2020 and 31st March 2021.
Likewise in order to provide relief to the buyer of such units, the budget proposes to exempt the property of the above nature and provides the higher tolerance of 20% for the difference being taxed in the hands of buyers.
I am unable to understand the reason for providing for higher tolerance limit only for the developer and that too entered during the specified period for the limit value of Rs 2 crore. Has the correction only impacted the residential property owned by the developer and not the genuine home owners? Does the government implicitly wishes the black money component in respect of property transaction with developers go up by providing such selective relaxation of tolerance limits between agreement value and stamp duty valuations. The benefit of higher tolerance limits should have been extended to all the property transactions irrespective of the value and not only for the sale of residential by developer upto Rs 2 crore that too during the specified period. This is more important in view of the fact that the stamp duty valuations have not been revised during the current year in most of the cases whereas the prices have in fact corrected during the same period.
(The writer is a tax and investment expert and can be reached at email@example.com)