#Budget2017: What Taxpayers Want From FM
India's common man, who is still reeling under the impact of demonetisation, has high hopes from the Union Budget 2017-18.
“It's time for the industry to acknowledge that demonetisation had a severe impact on sales, as potential buyers kept on postponing their purchase decision, waiting for an imaginary fall in property prices. We expect some confidence-boosting measures in the upcoming Budget which will put more money in people's hands, and that itself will bring back home sales to pre-demonetisation levels,” Sunil Mishra, Chief Business Officer (Primary Sales), PropTiger.com, was quoted as saying by The Economic Times.
“Under that, specifically, some cut in the tax rates for middle-income groups will be the most awaited measure. For the long-term, cuts in income tax rate, and possibly in stamp duty for home registration could be measures that may help the real estate industry in getting a jump-start,” Mishra added.
Let's have a look at what all is expected of Finance Minister Arun Jaitley when he presents his Budget on February 1:
Increase in income tax slabs
The Federation of Indian Chambers of Commerce and Industry (Ficci) and the Institute of Chartered Accountants of India (ICAI) have sent their proposal to the finance minister, asking for certain changes in the taxing regime. The two industry bodies have demanded the basic exemption limit to be increased from Rs 2.5 lakh to Rs 3 lakh. Currently, income ranging from Rs 2.5 to Rs 5 lakh is taxed at 10 per cent. Income from Rs 5 to 10 lakh is currently taxed at 20 percent; the two bodies want this tax slab to cover income from Rs 10 to Rs 20 lakh. Further, income over Rs 10 lakh is currently taxed at 30 per cent. In their proposal, Ficci and ICAI have demanded income over Rs 20 lakh to be taxed at 30 per cent.
This will increase the disposable income of buyers, enabling them to pay higher equated monthly installments (EMI), if need be.
Sample this. ABC's taxable income is Rs 6 lakh. As per current tax slab rate, his total tax liability will be around Rs 45,000. Under the tax slab proposed by the industry bodies, ABC wouldn't have to pay any tax for the first Rs 3 lakh. For the remaining Rs 3 lakh, the income will be taxed at the rate of 10 per cent. Thus, his total tax liability will be Rs 30,000 under the proposed tax slab rate. This means sum of Rs 15,000 is saved because of the increase in tax slab rates.
Incentivising Home Loans
It is expected that steps towards incentivising home loans will encourage people to use white money for purchasing homes. At present, under Section 24 of the Income Tax Act, tax deduction of Rs 2 lakh can be availed on the EMI paid for the home loan. It is expected that this tax deduction limit will be increased from Rs 2 lakh to Rs 5 lakh.
What first-time home buyers want?
Under Section 80EE of the I-T Act, first-time home buyers get additional tax deduction of up to Rs 50,000 on the interest paid for the home loan (over and above limit of Rs 200,000 Under Section 24(b) in case of self-occupied property). But, this is applicable only if the home loan is sanctioned between April 1, 2016 and March 31, 2017. To push its Housing for All mission, the government is expected to extend this period from March 31, 2017 to March 31, 2018.
Also, to avail the tax deductions, the value of the property purchased by first-time home buyers should not exceed Rs 50 lakh under the current rules. It is expected that in the Budget, this value will be increased to Rs 50 lakh. The Budget may also increase the sanctioned loan limit beyond the current limit of Rs 35 lakh.
Increase in house rent allowance
Increase in the house rent allowance is another key expectation of tax payers, which will be especially beneficial for self-employed people who can claim deduction of Rs 2,000 a month under Section 80GG of the I-Tax Act.
Reduction in stamp duty
In the Union Budget 2017, people are expecting reduction in stamp duty charges. Even, the Associated Chambers of Commerce and Industry of India (Assocham) emphasized on the reduction of stamp duty. The reduction in stamp duty will help even the highly suppressed sectors to recover. Moreover, this will be a great step bringing more transparency in the real estate sector.