Pro­vi­sions for hous­ing sec­tor in Bud­get 2017 ex­plained

Bud­get pro­pos­als are likely to lead to in­creased con­fi­dence among buy­ers

Hindustan Times (Chandigarh) - Estates - - HT ESTATES - He­mal Mehta, Neha Ru­pani and Rishabh Jain ht­es­tatesi@hin­dus­tan­ ■ The au­thors are part­ner and se­nior man­ager and deputy man­ager with Deloitte Haskins and Sells LLP

Hopes were run­ning high for the prospec­tive home­buy­ers as the fi­nance min­is­ter Arun Jait­ley, pre­sented the Union Bud­get 2017. With the re­cent re­forms such as Real Es­tate Reg­u­la­tory Author­ity (RERA), Be­nami Trans­ac­tions (Pro­hi­bi­tion) Act, the real es­tate sec­tor is go­ing through a trans­for­ma­tion that would lead to im­proved trans­parency and higher con­fi­dence among home­buy­ers. The fi­nance min­is­ter has dished out a few del­i­ca­cies for the home­buyer in Bud­get 2017.


The fi­nance min­is­ter an­nounced the in­fra­struc­ture sta­tus to af­forable hous­ing in his speech. This will help the de­vel­oper to raise for­eign cur­rency debt un­der ex­ist­ing ex­ter­nal com­mer­cial bor­row­ings (ECB) guide­lines, raise con­struc­tion fi­nance un­der pri­or­ity lend­ing from banks at a com­pet­i­tive rate and hence the over­all cost­ing of the project can be ef­fi­cient. This in turn will en­able de­vel­op­ers to pass on the ben­e­fit of lower project cost to the com­mon man.


“In sec­tion 2 of the In­come-tax Act, in clause (42A),— (a) in the third pro­viso [as in­serted by sec­tion 3 of the Fi­nance Act, 2016], af­ter the words and brack­ets “a com­pany (not be­ing a share listed in a recog­nised stock ex­change in In­dia)”, the words “or an im­mov­able prop­erty, be­ing land or build­ing or both,” shall be in­serted with ef­fect from the 1st day of April, 2018;” Pe­riod of hold­ing in case of im­move­able prop­erty, be­ing land / build­ing has been pro­posed to be re­duced from the ex­ist­ing 36 months to 24 months for cap­i­tal gains com­pu­ta­tion. This will make mak­ing real es­tate an at­trac­tive in­vest­ment op­tion.


“In Sec­tion 55 of the In­come-tax Act, with ef­fect from the 1st day of April, 2018,— (A) in sub-sec­tion (1), in clause (b), in sub-clause (2), in item (i), for the fig­ures, let­ters and words “1st day of April, 1981”, the fig­ures, let­ters and words “1st day of April, 2001” shall be sub­sti­tuted; (B) in sub-sec­tion (2), in clause (b), for the fig­ures, let­ters and words “1st day of April, 1981” wher­ever they oc­cur, the fig­ures, let­ters and words “1st day of April, 2001” shall be sub­sti­tuted.”

Cost of ac­qui­si­tion of an asset ac­quired be­fore April 4, 2001 shall be al­lowed to be taken as fair mar­ket value as on April 1, 2001 and the cost of im­prove­ment shall in­clude only those cap­i­tal ex­penses which are in­curred af­ter April 1, 2001. This will re­sult in a higher cost base to the seller and con­se­quently re­duce the tax bur­den.


More op­tions for rein­vest­ment to claim tax ex­emp­tion “In sec­tion 54EC of the In­cometax Act, in sub-sec­tion (3), in the Ex­pla­na­tion, in clause (ba), for the words and fig­ures “the Com­pa­nies Act, 1956” oc­cur­ring at the end, the words and fig­ures “the Com­pa­nies Act, 1956; or any other bond no­ti­fied by the Cen­tral Gov­ern­ment in this be­half ” shall be sub­sti­tuted with ef­fect from the 1st day of April, 2018.” Pro­ceeds re­ceived from sale of prop­erty can be rein­vested in any bond re­deemable af­ter three years (no­ti­fied by the Cen­tral gov­ern­ment in this be­half). This amount will a also be el­i­gi­ble for ex­emp­tion.


“(3A) Notwith­stand­ing any­thing con­tained in sub-sec­tion (1) or sub-sec­tion (2), where in re­spect of any as­sess­ment year, the net re­sult of the com­pu­ta­tion un­der the head ‘In­come from house prop­erty’ is a loss and the as­sessee has in­come as­sess­able un­der any other head of in­come, the as­sessee shall not be en­ti­tled to set off such loss, to the ex­tent the amount of the loss ex­ceeds two lakh ru­pees, against in­come un­der the other head.”

It is pro­posed to restrict loss from house prop­erty with other heads of in­come to ` 2 lakh. This may im­pact a per­son who may have sev­eral prop­er­ties and has let out prop­er­ties to ten­ants.

A home­buyer will have rea­sons to savour the tax ben­e­fits ex­tended as the gov­ern­ment has made ef­forts in mak­ing real es­tate more at­trac­tive for the home­buy­ers who will now have in­creased con­fi­dence to make in­vest­ments in real es­tate sec­tor.


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