FM Goyal Goes All Out To Please Taxpayers, Help Property Owners, Developers
The Prime Minister Narendra-Modi-led government’s Interim Budget was no academic exercise. Filling in for Union Minister Arun Jaitley, who is currently undergoing treatment in New York, officiating Finance Minister Piyush Goyal presented the government’s Vote on Account right before India goes to polls, and did everything possible to please the voters. At the end of his one-and-half-hour-long speech during which he kept shuffling between English and Hindi, Goyal made key announcements that can unanimously be termed people-pleasing. And truth be told, people do have a reason to cheer, especially taxpayers from the salaried class. Property owners and real estate developers, too, can’t really complain as the FM offed concessions on rental income and has proposed to exempt tax on notional rent for unsold housing units for two years.
Now, let us see who got what from Goyal’s Interim Budget presented on February 1.
Income tax, small savings: The FM has increased the threshold for income tax exemption limit to Rs 5 lakh from the current Rs 2.5 lakh. He has increased the standard deduction from the existing Rs 40,000 to Rs 50,000. Do note here that there has been no change in tax slabs.
“As a result, even persons having gross income up to Rs 6.50 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance, etc.,” the FM said
“With additional deductions such as interest on home loan up to Rs 2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure on senior citizens, etc., persons having even higher income will not have to pay any tax,” he added.
The government will also increase the TDS (tax deducted at source) threshold on interest earned on bank/post office from Rs 10,000 to Rs 40,000.
Check out how the change impacts you!
Net total income
All figures in Rs
Source: B S R & Co. LLP
House rent: The government has also proposed to deduct the exemption limit of tax on rent from Rs 1.80 lakh to Rs 2.40 lakh. Under Section 194I of the Income Tax Act, tenants are liable to deduct TDS in case the aggregate of the amount of rent paid or likely to be paid during a financial year exceeds Rs 1.80 lakh.
Capital gains: Earlier, property owners, who sold their residential property had to use the proceeds in another residential property to save on capital gains tax. Now, they can use the proceeds in two properties as the benefit of rollover of capital gains under Section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a taxpayer having capital gains up to Rs 2 crore. This benefit can be availed once in a lifetime.
Tax on second self-occupied property: Those who have two self-occupied properties will not have to pay any tax on the notional annual value of their second property, a tax provision that discourages people from investing in a second property.
“Considering the difficulty of the middle-class having to maintain families at two locations on account of their jobs, children’s education, care of parents etc., I am proposing to exempt levy of income tax on notional rent on a second self-occupied house,” Goyal said in his Speech.
“This change may be beneficial for those who have lower interest out-go on their second self-occupied property," says Vaibhav Sankla, managing director-India, H&R Block, adding, "For those whose housing loan interest out-go for the second house is higher than their taxable rental income, the situation would get complicated.
According to Sankla the proposed amendment means such taxpayers may not be able to claim the second house as deemed let-out and the overall interest deduction under Section 24 for both the self-occupied houses would be restricted to Rs 2 lakh only. "This will reduce the possible tax benefit in future from set-off of carried forward losses,” he says.
Unsold inventory: The government has proposed to extend the period of exemption from levy of tax on notional rent, on unsold inventories from one year to two years. This move will greatly help India’s real estate developers who have been struggling to sell their existing stock amid an ongoing slowdown.
Affordable housing: Developers of affordable projects can avail of the benefits under Section 80-IBA for another year, that is till March 2020. Under the Section, income of developer building affordable housing projects was made tax free for projects that would have been approved till March 2019.
Goods and services tax: Hinting that taxation on real estate may be rationalised in the near future, the FM said the government had appointed a group of ministers to examine the issue and make a recommendation in this regard.