Budget 2019: Is It Good For Homebuyers?

In the interim Budget 2019, Finance Minister Piyush Goyal proposed numerous tax benefits for the real estate sector in India. These benefits are likely to make a significant impact on property sales across the country.

Let’s take a look at announcements made in the budget and their influence on home buyers and the real estate sector in the country.

No notional rent tax if you own 2 self-occupied houses

As per existing laws, if an individual holds two homes, both occupied by family members, they have to pay tax on the notional rent of one of the two self-occupied properties. The notional rent is the higher of fair rent or municipal rent but restricted to standard rent fixed under the Rent Control Act. Fair rent is an estimate based on the location, while the local municipal body decides municipal rent; the legislation fixes standard rent.

According to new changes proposed in interim budget, if an individual owns 2 self-occupied houses and there is no outstanding loan on the second one, tax on notional rent will be exempted. This move can be beneficial for families that have to maintain two homes because of their children’s education and jobs. However, if they own 3 self-occupied properties, they would have to pay tax on the notional rent of one out of the three self-occupied properties.

TDS on rental income increased

Based on the proposed new changes, house rents up to Rs. 2,40,000 will not attract TDS since the TDS limit has been raised from the previous limit of Rs. 1,80,000. This move can encourage people to buy home in India.

Extension of benefit under Section 80 IBA

Section 80 IBA of Income Tax Act allows real estate developers to obtain tax deduction of an amount equal to 100 per cent of their profit. This enables them to offer affordable housing for public and inspire more buyers to invest in popular residential projects like Kolte Patil Life Republic, Sunteck Westworld, and PBEL City in India. According to the announcements in the interim budget, tax exemption has been extended for another year up to 31st March 2020. Earlier this tax exemption was available only for a year.

Reinvestment of capital gains in two houses

Prior to the interim budget, you could use your long-term capital gains from a property’s sale to reduce your tax outgo. This could be done by reinvesting the gains in buying only a one-house property. Now, the interim budget also proposed that long-term capital gains up to Rs. 2 crores could be used to purchase two house properties. However, you can claim this extended benefit only once in your lifetime.

With the interim budget, if you think buying your own house can be easier, then check out home loan by Bajaj Finserv Homes & Loans, who offer loans up to Rs. 3.5 crores. Along with funds, you also get in-person assistance for site visit and documentation.

Summary

To sum up, positive announcements in the interim budget 2019 for real estate, India addressed several long-standing issues of homebuyers and housing developers. According to announcements, homebuyers do not have to pay any tax if they own up to two self-occupied properties. The threshold limit of TDS for deducting tax on rent will increase from Rs. 1,80,000 to Rs. 2,40,000. Capital gains on the sale of a house can be reinvested in buying two houses instead of one. And lastly, the government has made affordable housing in India possible for housing developers by extending the relief under Section 80-IBA to 2 years from the date of project completion.

Another positive outcome from the budget was the announcement of income tax rebate to small and medium-scale taxpayers. Even though it isn’t directly related to the real estate sector, experts believe it can have a significant impact on real estate business. As people’s disposable income increase, the demand for housing is likely to boost further. Moreover, individuals may be encouraged to buy second homes, as the tax on notional rent of the self-occupied property is now exempted.

The common man may have numerous reasons to cheer with the interim budget. Buying a home can become a reality for many, with new tax incentives in place. If you are looking to purchase property and need financial assistance, you can avail a home loan from a reputed company like Bajaj Finserv Homes & Loans, which offers a loan up to Rs. 3.5 crores on easy EMIs.