Following are the key proposals for real estate sector made by Mr. Piyush Goyal while presenting the Interim Budget 2019-20:
1. No notional tax on rental income for home buyers on purchasing second house. This will boost second house purchase as a means for generating rental income. In addition, demand for weekend homes will also increase in real estate.
2. Home Buyers can now avail Long Term Capital Gain(LTCG) tax exemption on buying up to 2 residential properties within a year when they sell their first property. Earlier the exemption was applicable only for buying 1 property and buyers were forced to buy single property with high value to absorb their long term capital gain. The LTCG tax exemption benefit however is only for gains made up to Rs 2 crore.
3. Builders to now get tax exemption on unsold inventory for up to 2 years as against exemption for 1 year at present from the date when the project receives Completion Certificate. Builders are deemed to be generating rental income from unsold inventory hence the inventory is taxed at Annual Lettable Value.
4. Benefits under section 80-IBA of Income Tax Act is being extended for one more year, that is till 31 Mar 2020. This will let Builders who develop projects with units having less than 60 sqm carpet area continue to get 100% tax waiver on profits generated from sale of such housing units.
5. Budget has proposed no tax on rental income up to Rs 2.4 lakh, up from current Rs 1.8 lakh limit. This will further boost housing as an investment option amongst home buyers for generating rental income.
6. A major announcement on the tax slab has been to waive off income tax for income up to Rs 5 lakh for individuals as against Rs 2.5 lakhs at present. This will further boost purchasing power of affordable housing in Tier 2 and 3 cities in the country.
7. GST reduction from current 12% for under construction projects is still open for consideration. Announcement on the same is expected in final draft of Budget 2019-20.
Interim Budget 2019 has certainly brought in multiple tax exemptions for both Home Buyers and Builders and is expected to boost the sector which suffered a set back from series of landmarks events such as RERA, demonetization and GST in past 2-3 years.
It will be interesting to see how many of these proposals actually get notified when the final budget comes into force from 1 April ’19.