On February 1 when the Finance Minister presents the Union Budget 2017, will it usher in changes which will kick start the economy? This is a question that most industry sectors and the man on the street are asking.
The real estate sector, the builders, developers and investors included are all hoping that the Budget will give the sector a much-needed push, coming as it were, just a few months after demonization was announced. The past two to three years have been quite dull for the real estate sector and all the stakeholders are hoping that there would be some relief announced in the Union Budget.
The first on the wish list is the restructuring of the Income Tax slabs. Currently, there are no tax deductions on income up to INR 2.5 lakh; however, most people are hoping that there would be at least a marginal increase of INR 50,000 as this would really help many middle-class families. This would also bring more liquidity into the market which in turn would benefit the real estate industry as people would then think of investing in properties.
Further on the tax exemption; at present, under Section 80C you are eligible for a tax deduction of INR 1.5 lakh per year. The general wish is that this deduction is hiked to INR 2.5 lakh per year.
The real estate sector has called on the government to consider the market realities in the property sector and increase the rebate to at least INR 5 lakhs which they feel would reflect the high prices in the sector. Over the last ten years, property prices across the country have gone through the roof, so has the cost of construction while incomes have grown at a slower pace. The real estate sector has asked that the principal and interest paid as a part of the home loan; the rebates and the benefits given on the loans should be linked so that the taxpayer could benefit from them and actually save money.
Under the provisions of Sector 80C, INR 1.5 lakh can be deducted from a tax payer’s total income if he invests in tax saving investments such as the Public Provident Fund (PPF), the Employee Provident Fund (EPP), 5-year tax saver deposits, NSC and postal saving schemes. This is for the conservative investor.
If you are willing to take a higher risk for a better return then there are equity linked saving scheme or ELSS. The investments into ELSS are also deductible under Section 80C. However, this list also includes the principal amount of the home loan. So most taxpayers just use this principal amount to fulfil the deduction; if a separate deduction is applied to the principal it will encourage the taxpayer to think of long term savings.
As the government is moving towards the implementation of the Goods and Services (GST) Act, bringing real estate under the purview the GST Act is high on the wish list. Industry bodies have suggested that all charges, duties, taxes, cess such as land conversion charges, development charges, stamp duty, transfer duty, VAT, service tax and so on are merged.
The real estate sector has called for a speedy implementation of the Real Estate Regulatory Act which was passed in 2016. The government should complete appointments of the officials at the state level so that the implementation is on track.
The single window clearance for projects has been a demand from the industry for the longest time. The real estate sector hopes that the Union Budget 2017 will pave the way for this to become a reality.
Nina Varghese for IndiaProperty.com