TAX BENEFITS TO THE BUILDERS, DEVELOPING AFFORDABLE HOUSING

The much aggrieved real estate sector gets some relief with the #UnionBudget2016 proposed by The Finance Minister Arun Jaitely. Union Budget 2016 presented by the Finance Minister has tried to infuse confidence in the real estate market by unveiling a slew of measures to boost affordable housing.

The industry that has been in doldrums for long, facing protracted slump has been looking for some incentives to beat the downturn and banking on the government’s ambitious ‘Housing for All’ scheme by 2022.

The builders and the construction developers whole heartedly and in full fledged supported the Finance Minister for some of the measures he has taken to boost affordable housing by making the following provisions:

  • 100 per cent deduction for profits to an undertaking from a housing project for flats up to 30 square metres in four metro cities
  • Exemption of service tax for houses less than 60-metres will also benefit the real estate developers engaged in creating affordable housing in Partnership”component of PMY the Mumbai Metropolitan Region.

(Service Tax Exemption by way of construction with following 3 conditions – applicable from 01.03.2016:

  • Housing project under PMAY – Pradhan Mantri awas Yogna / HFA – Housing for All

 Additional tax deduction on interest paid for loan amount on homes less than Rs 50-lakh.  

*Condition – first time buyer) (Int benefit Sec24 Rs. 2Lac + Sec80C Principle 1.5Lac + new 50k Sec80EE)

The move would also complement the Prime Minister’s ambitious dream project of ‘Housing for All’ if the housing project is approved by the competent authority before the 31st March, 2019 subject to certain conditions which among the other things include the following :

Approval must be after 01st Jun 2016 but before 31st march 2019

  • The project is completed within a period of three years from the date of approval
  • where residential unit is allotted to an individual, no such unit shall be allotted to him or any member of his family, etc
  • built-up area of shops & other commercial establishment must be less that total built-up area

 

Plot of Land

 

Location

Size of the residential (Individual) unit

1000 Sq Meter

Delhi, Mumbai, Chennai & Kolkatta

30 Sq meter

2000 Sq Meter

Other than above

60 Sq meter

The Finance Minister has also addressed the issue of REIT through the exemption of dividend distribution tax.

An increase in tax deduction from Rs 24,000 to Rs 60,000 for those living in rented houses will also benefit the rented flat-holder, thereby complementing indirectly the housing sector.

Many real estate builders and builders have shared a fact of compliments to the Finance Minister  for rationalisation and simplification of the tax structure that will reflect ease of doing business for the corporate sector in terms of certain processes.

Builders and real estate experts say the exemption for affordable housing projects would bring in a 15 % -20 % upside on profits after paying the Minimum Alternate Tax(MAT) tax for a real estate developer building such a project, making it easier for the developer to attract foreign and domestic investment for housing projects.

Please feel free to write to [email protected] for any further queries or issue regarding the above article.

 

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