The interim budget 2019 presented by the Government of India has thrown some positive light on the real estate industry. With a plethora of benefits such as tax exemption reforms and an income tax rebate for a second home, it is quite evident that potential home buyers are the biggest winners of this year’s budget. Let’s take a look at few of the landmark reforms that will lead to the complete transformation of the Indian real estate industry:
Benefits of capital gains
Before the interim budget 2019, home buyers could reinvest their saved capital gains from selling a property in another property. According to the previous tax guidelines, capital gains could not be used to buy two separate properties. But, these guidelines have been revised with the roll-out of Union Budget 2019-20. Now, investors can utilise their capital gains to buy two different residential units. This policy is covered under Section 54 of the Income Tax Act, and it will be beneficial for all those tax payers who have capital gains upto 2 crores. However, it is important to bear in mind that you can avail this benefit only once in a lifetime. Such a reform can definitely impact the demand for real estate properties in India.
Tax exemption on notional rent
Most of the real estate investors and home buyers are reluctant to make a second investment mainly because of the tax charged on the notional rental income from their second home. The rule was applicable irrespective of whether the residential property was rented out or not. But, the interim budget 2019 has scrapped this rule by exempting the levy of income tax for notional rent from the secondary self-occupied property. Due to this, the Indian real estate industry is sure to witness a spike in the number of second-time investors.
Increased benefits for affordable housing segment
One of the striking highlights of Budget 2019 is the extension of Section 80 IBA of the Income Tax by one year. So, all the housing projects approved till March 31, 2020, will benefit from this extension. This is a great advantage for homebuyers who are looking for affordable home options. Boosting the affordable housing segment, in turn, makes the Government’s Housing For All initiative a grand success.
The revised rental income limit for TDS
In the recent Union Budget, the Indian Government has revised the limit of the rental income applicable for TDS deduction. According to the previous law, the TDS tax was applicable to all the tenants including the salaried individuals who earn rental income upto 1.8 lakhs. But, after the roll out of the Union Budget 2019, the TDS tax will be applicable only if your rental income exceeds 2.4 lakhs.
Relief for real estate developers
One of the biggest challenges faced by property developers is the unsold residential properties and notional rent from such inventories. Earlier, if the unsold residential unit was a year older, then notional rent was charged on them. As a big relief to the real estate players, this Union Budget has extended this period to two years, starting from the end of the completion year. Now, notional rent applies to properties which are more than two years old.
Income tax rebate for annual income up to 5 lakhs
The government has proposed tax exemption for salaried individuals who have an annual income of Rs. 5 lakhs. If the individual has invested in some tax saving schemes under Section 80 (C), then his or her tax free income limit will be raised to 6.5 lakhs per annum. This is one of the landmark reforms that is highly beneficial for home buyer and real estate industry. So, the home buyers falling under this tax bracket can increase their savings and make affordable real estate investments.
Impetus on Infrastructure growth
Another striking highlight of this interim budget is the allocation of Rs 19,000 crores towards Sadak Yojana to boost the physical and social infrastructure in India. The budget also stressed upon the affordable housing option under the Prime Minister Awas Yojna Scheme. These two steps are crucial to implementing affordable and accessible real estate properties in India. Furthermore, such initiatives will enable more individuals to buy their dream home either in cities or outskirts.
With so many tax benefits and a boost in the affordable housing sector, the Indian real estate industry is growing in the right direction. If you are a first time home buyer or looking to make a second investment, ‘now’ is the right time to make a wise investment that will fetch you greater returns for the future.
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