Finance minister Piyush Goyal presented the Union budget for 2019.
The government announced assured farmer income and pension for unorganised sector workers.
Income tax exemption limit has been raised to Rs 5 lakh from Rs 2.5 lakh.
NEW DELHI: Finance minister Piyush Goyal presented the Union Budget 2019 in the Lok Sabha on Friday.
The government has announced new measures to benefit salaried class, farmers and workers among others in the Budget. The new measures in the Budget 2019 that are likely to act as ‘boosters’ for the government before the Lok Sabha polls are as follows:
Assured income to farmers
Under Pradhan Mantri Kisan Samman Nidhi, Rs 6,000 per year for each farmer, in three installments, to be transferred directly to farmers’ bank accounts, for farmers with less than 2 hectares landholding. This initiative is likely to benefit 12 crore small and marginal farmers, at an estimated cost of Rs 75,000 crore.
Pension for 10 crore workers
Mega Pension Yojana, namely Pradhan Mantri Shram Yogi Mandhan, to provide assured monthly pension of Rs 3,000 per month to workers in the unorganised sector after 60 years of age. Pensioners will have to contribte Rs 100 per month.
Middle class gets huge tax rebates
Individual taxpayers having annual income up to Rs 5 lakh will get a full tax rebate. Individuals with gross income up to 6.5 lakh rupees will not need to pay any tax if they make investments in provident funds and prescribed equities. The standard deduction for salaried persons raised from Rs 40,000 rupees to Rs 50,000. TDS threshold on rental income raised from Rs 1.8 lakh to 2.4 lakh. No tax on notional rent on second house.
Gratuity limit increased Gratuity limit hiked from Rs 10 lakh to 30 lakh for employees with service of at least five years from the next fiscal.
Income tax refunds within 24 hours Income tax refunds will be processed within 24 hours and released immediately. The finance minister announced that within the next two years, the assessment of all tax returns will be done electronically without any personal interface.
* Individual taxpayers with annual income up to 5 lakh rupees to get full tax rebate.
* Individuals with gross income up to 6.5 lakh rupees will not need to pay any tax if they make investments in provident funds and prescribed equities.
* Standard tax deduction for salaried persons raised from 40,000 rupees to 50,000 rupees.
* TDS threshold on rental income raised from 1.8 lakh to 2.4 lakh rupees.
* “Around 3 crore middle-class taxpayers will get tax exemption due to this measure,” the finance minister said.
* Gratuity limit increased from 10 lakh to 30 lakh rupees.
* Benefit of rollover of capital tax gains to be increased from investment in one residential house to that in two residential houses, for a taxpayer having capital gains up to 2 crore rupees; can be exercised once in a lifetime.
* Benefits under Sec 80(i)BA being extended for one more year, for all housing projects approved till end of 2019-2020.
* “We are poised to become a 5 trillion dollar economy in the next five years, we aspire to become a 10 trillion dollar economy in the next eight years,” Goyal said.
* Businesses with less than Rs. 5 crore annual turnover, comprising over 90% of GST payers, will be allowed to return quarterly returns.
* Direct tax collections from 6.38 lakh crore rupees in 2013-14 to almost 12 lakh crore rupees; tax base up from Rs 3.79 crore to Rs 6.85 crore. 99.54% returns have been accepted without any scrutiny. In January 2019, GST collections has crossed 1 lakh crore rupees.
* GST has been continuously reduced, resulting in relief of 80,000 crore rupees to consumers; most items of daily use for poor and middle class are now in the 0%-5% tax bracket.
* Two per cent interest subvention on loan of 1 crore for GST registered MSME units.
* Group of Ministers examining how prospective house buyers can benefit under GST.
* GST is the undoubtedly the biggest taxation reform implemented since Independence; through tax consolidation, India became one common market; inter-state movements became faster through e-way bills, improving Ease of Doing Business.
* Within almost two years, almost all assessment and verification of IT returns will be done electronically by an anonymized tax system without any intervention by tax officials.
* “Cost of data and voice calls in India is now possibly the lowest in the world; mobile and mobile part manufacturing companies have increased from 2 to 268,” he said.
* Single window clearance for filmmaking to be made available to Indian filmmakers, anit-camcording provision to be introduced to Cinematography Act to combat film privacy.
* Allocation for North Eastern region proposed to be increased to Rs 58,166 crore in this year a rise of over 21% from the previous year.
* Increased allocation for Rashtriya Gokul Mission to 750 crore in current year.
* Two per cent interest subvention to farmers pursuing animal husbandry and fisheries.
* “Urgent action needed to increase hydrocarbon production to decrease imports; change in bidding procedure and exploration procedure being implemented,” Goyal added.
* Committee under NITI Aayog to be set up to identify and denotify nomadic and semi-nomadic communities; Welfare Development Board to be set up under Ministry of Social Justice and Empowerment for welfare of these hard-to-reach communities and for tailored strategic interventions.
* Mega Pension Yojana, namely Pradhan Mantri Shram Yogi Mandhan, to provide assured monthly pension of 3000 rupees per month, with contribution of 100 rupees per month, for workers in unorganised sector after 60 years of age.
* “(This) will benefit 10 crore workers in unorganized sector, may become the world’s biggest pension scheme for unorganized sector in five years,” Goyal said.
* Under Pradhan Mantri Kisan Samman Nidhi, 6000 rupees per year for each farmer, in three installments, to be transferred directly to farmers’ bank accounts, for farmers with less than 2 hectares land holding.
* This initiative is likely to benefit 12 crore small and marginal farmers, at an estimated cost of Rs 75,000 crore.
* “We controlled double-digit inflation. Inflation is a hidden and unfair tax; from 10.1% during 2009-14, inflation in December 2018 was just 2.1%. We have broken the back of back-breaking inflation,” Goyal said.
* Fiscal deficit has been bought down to 3.4%; CAD (current account deficit) likely to be 2.5% of GDP this year.
* Soon after presenting the in Lok Sabha, the finance minister, in a press conference, elaborated on the incentives and initiatives announced by his government — “Those sitting in AC rooms cannot understand the plight of the small farmers. Keeping this in mind, we have introduced Pradhan Mantri Kisan Samman Nidhi scheme. This is a historic decision,” he said on the cash incentive scheme launched for the country’s farmers.
* “This is just a trailer of the Budget, which after elections, will take India on the path to development,” Prime Minister Narendra Modi said shortly after finance minister presented the Budget in Lok Sabha.
100 Key Highlights of Union Budget 2017 presented by FM Piyush Goyal FY 2018-19
Individual tax payers earning income up to Rs 5 Lac will get full tax rebate, ensuring if you invest in 80C like PPF etc you wont be taxed up to Rs 6.5 Lacs. Around 3 crore middle class taxpayers will get tax exemption due to this measure
Standard Deduction for salaried class increase from Rs 40,000/- to Rs 50,000/-
TDS threshold on interest on bank and post office deposits raised from 10,000 to 40,000 rupees
No TDS on House Rent up to Rs 2.4 Lakhs
Benefit of rollover of capital tax gains to be increased from investment in one residential house to that in two residential houses, for a taxpayer having capital gains up to 2 crore rupees; can be exercised once in a lifetime
Gratuity limit increased from 10 lakh to 30 lakh rupees for all
MSME registered under GST will get of 2 per cent interest subvention on the incremental loan of 1 Crore
NPS has been more liberalised. The government has increased its share to 14 per cent from the existing 10 per cent,
GST has been continuously reduced, resulting in relief of 80,000 crore rupees to consumers; most items of daily use for poor and middle class are now in the 0%-5% tax bracket
Computerised system to be in place in next 2 years eliminating direct interference of officers and clients in Scrutiny of Income Tax Cases
Businesses with less than Rs. 5 crore annual turnover, comprising over 90% of GST payers, will be allowed to return quarterly returns
India will become a $5 trillion economy in 5 years
Govt announces assured structural income support for farmers, naming it PM Kisaan Samman Nidhi.
The Kisan yojana will be effective December 1, 2018, and the money will be directly transferred into their account. Expect spend of Rs 75,000 crore on this scheme. To provide assured income support for small and marginal farmers, Pradhan Mantri Kisan Samman Nidhi scheme has been approved
Under Pradhan Mantri Kisan Samman Nidhi, 6000 rupees per year for each farmer, in three installments, to be transferred directly to farmers’ bank accounts, for farmers with less than 2 hectares land holding. This initiative will benefit 12 crore small and marginal farmers, at an estimated cost of Rs. 75,000 crore, this will enable farmers to earn a respectable living
2018-19 Revised Fiscal deficit at 3.4% Current account deficit to be contained to 2.5%:
Rs 3 lakh crore recovered by banks through IBC, says Goyal. Now bigger businessmen also concerned about repaying debt
India is the fastest growing major economy in the world today. From being 11th largest economy, we are today the 6th largest economy
we had not controlled inflation, our families would have been spending 35-40% more on basic amenities
We brought down average inflation to 4.6% lower than inflation during tenure of any other govt. Inflation in December 2018 was 2.1%.
Government said to the RBI to take a hard look into stressed assets and NPAs. Measures have been taken towards clean banking. IBC has institutionalised a resolution mechanism while preserving the underlying business and jobs
We have noticed that Bank of India, Bank of Maharashtra and Oriental Bank have come out of the PCA framework and our efforts to clean up the banking system will help others too very soon. Expect other banks to soon exit Prompt Corrective Action (PCA)
– Rs 3 lakh crores loan defaults have already been recovered – We brought transparency to auction and tender process – Steps to crack whip on Economic Offenders – India has achieved 98% rural sanitation
We have walked the talk, ushered in a new era, initiated the world’s largest behavioural change movement through Swachh Bharat Mission, I thank the nation for the success of this national mission
More than 98% rural sanitation coverage has been achieved; more than 5.45 lakh villages declared ODF
Government has ended the practice of ‘phone’ banking at state-owned banks, and ushered more transparency.
We have bridged the urban-rural divide in the country. Several times in the past, only empty promises had been made to ppl living in villages. Construction of rural roads has been trebled in the last few years:
During 2014-18, 1.53 lakh houses have been constructed under PM Awas Yojana: FM Shri Piyush Goyal
1,70,000 crore spent for bringing food at affordable rates to poor people
Close to 3 lakh crore already recovered in favour of banks and creditors, big defaulters are not spared by our government. Recapitalization of banks amounting to 2.6 lakh crore has been done
budget allocation of Rs 60,000 crore for National Rural Employment Guarantee Act in 2019-’20.
FY19 Food Subsidy Spend Was Rs 1.7 Lakh Crore:
Rs 60,000 cr set aside for MGNREGA this year
The world’s largest healthcare programme, launched to provide medical care to nearly 50 crore people, resulting in 3,000 crore savings by families of poor sections:
Electricity for all households will be a reality by March 2019 & achieved 98% rural sanitation coverage
21 AIIMS operating in India now, 14 of which were announced from 2014, The 22nd AIIMS will be created at Haryana.
The Fugitive Economic Offenders Bill (2018) will help confiscate and dispose-off the assets of economic offenders who escaped the jurisdiction of the laws in India,
10 lakh people have been treated under Ayushman Bharat scheme and have seen massive scale-up in healthcare over last 5 years
Mahatma Gandhi National Rural Employment Guarantee program’s allocation increased by Rs 5000 crore to Rs 60,000 crore,
The government is committed to providing electricity to every house. LED will help save Rs 50,000 crore in electricity bills in the next few years.
One crore 53 lakh houses have been made which is 5 times the earlier run rate
Pradhan Mantra Gram Sadak Yojana allocation is set at Rs 19,000 crore, he said, adding, kids will no longer have to walk from home to school. They will now have a bus service there.
Increased allocation for Rashtriya Gokul Mission to 750 crore in current year
PM Gram Sadak Yojana spend seen at Rs 19,000 crore.
2% interest subvention to farmers pursuing animal husbandry and fisheries
In place of rescheduling of crop loans, all farmers severely affected by severe natural calamities will get 2% interest subvention and additional 3% interest subvention upon timely repayment:
Without disturbing the existing reservation system, a 10% reservation for Economically weaker sections in educational institutions and government jobs has been ensured
High growth and formalization of economy has resulted in increased EPFO membership by 2 crore in last two years:
High growth of India has led to increase in jobs as represented in EPFO. EPFO membership has increased by 2crore New Pension Scheme has been further liberalized as Government’s contribution has increased to 14%.
50% of the GDP comes from sweat and toil of 42 crore workers in unorganized sector:
Mega Pension Yojana, namely Pradhan Mantri Shram Yogi Mandhan, to provide assured monthly pension of 3000 rupees per month, with contribution of 100 rupees per month, for workers in unorganized sector after 60 years of age
Will benefit 10 crore workers in unorganized sector, may become the world’s biggest pension scheme for unorganized sector in five years:
Rs 143 crore LED bulbs distributed which will save 50,000 crores of rupees
Committee under @NITIAayog to be set up to identify and denotify nomadic and semi-nomadic communities;
Welfare Development Board to be set up under @MSJEGOI for welfare of these hard-to-reach communities and for tailored strategic interventions
For workers who receive grievous injuries, they will now get Rs 6 lakh from Rs 2.5 lakh through EPFO
Rashtriya Kamdhenu Ayog to look after effective implementation of policies and schemes for welfare of cows
Nearly 8 crore free LPG connections were planned to be provided to relieve women from use of woodfire for cooking. So far 6 crore connections have already been provided.
For workers and labourers, a new pension scheme will come up to ensure an increase in Centre’s contribution by four percent. The pension has been increased from Rs 3,500 to Rs 7,000:
Welfare department board to be set up under the Ministry of Social Justice and Empowerment.
75% of woman beneficiaries under PM MudraYojana, 26 weeks of maternity leave and Pradhan Mantri Matritva Yojana, are all empowering women:
A national programme on Artificial Intelligence has been envisioned by the government. Nine priority areas have been identified:
Committee under NITI Aayog to be set up to for denotifed nomadic & semi nomadic community
1 crore loan can now be obtained under 59 minutes:
Transactions of more than 17,500 crore rupees on Govt of India, resulting in savings of 25%-28%
Our soldiers are our pride and honour; #OROP, pending for last 40 years, has been implemented by us:
Our defence budget this year is over 3 lakh crore, Already disbursed 35,000 crore rupees for our soldiers under #OROP, substantial hike in military service pay has been announced:
Construction of rural roads has been tripled; 15.8 lakh out of a total 17.84 lakh habitations have been connected with pucca roads under #PMGSY. #PMGSY allocated 19,000 crore rupees in 2019-20(BE)
India is the fastest highway developer in the whole world, 27 kms of highways built each day, projects stuck for decades completed;
Vande Bharat Express will provide speed, service and safety to citizens and will give a boost to #Make in India:
Indian Railways experienced the safest year, Vande Bharat to give passengers a world class travel experience
Our commitment to promote renewable energy is reflected in our initiative to set up International Solar Alliance; installed solar generation capacity has increased 10 times in last five years; l
akhs of new jobs being created by the sector Already disbursed 35,000 crore rupees for our soldiers under #OROP, substantial hike in military service pay has been announced
Domestic air traffic doubled in the last 5 years
Digital India: It is leading the world in monthly consumption of mobile data – increased by 50 time. Cost of voice calls and mobile data is possibly the lowest in the world.
Mobile and mobile part manufacturing companies have increased from 2 to 268
34 crore #JanDhanYojana accounts opened in last five years; Aadhaar almost universally implemented; ensuring poor and middle class receive government benefits directly
Single window clearance for filmmaking to be made available to Indian filmmakers, anit-camcording provision to be introduced to Cinematography Act to combat film privacy
Our commitment to promote renewable energy is reflected in setting up International Solar Alliance; installed solar generation capacity has increased 10 times in last five years
Allocation for the north eastern region has been proposed to be increased to Rs 58,166 crore in this year, it will be a 21% rise over the previous year
Simplification of direct tax system will benefit taxpayers; direct tax reduced and tax interface made simpler and faceless to make life easier; resulting in increase in tax collections and return filings:
Direct tax collections from 6.38 lakh crore rupees in 2013-14 to almost 12 lakh crore rupees; tax base up from 3.79 crore to 6.85 crore:
54% returns have been accepted without any scrutiny:
Within almost two years, almost all assessment and verification of IT returns will be done electronically by an anonymized tax system without any intervention by tax officials, Refunds to be processed within 24 hours:
Railway operating ratio seen 96.2% in FY19 Vs 95% FY20
Monthly mobile data consumption has increased 50x in last 5 years; cost of data & voice calls in India is possible the lowest in the world
All unmanned level crossings on broad gauge network of railways have been completely eliminated
Unmanned system to be created for scrutiny of income tax returns.
The Group of Ministers is examining how prospective house buyers can benefit under Goods & Services Tax (GST)
Indian Customs is implementing full digitization of exim transactions and leveraging RFID for logistics
Average GST collection at Rs 97,100 cr in FY19
18% increase in direct tax collections in 2017-18, 1.06 crore people included in tax base; more than 1 crore citizens filed IT returns for the first time, after demonetization
Committed to eliminating the ills of black money; anti black money measures taken have brought undisclosed income of about 1.30 lakh crore rupees to the surface; 3.38 lakh shell companies deregistered
If we hadn’t controlled inflation, families would have spending 35-40% more on basic necessities
We are poised to become a 5 trillion dollar economy in the next five years, we aspire to become a 10 trillion dollar economy in the next eight years
Exemption for GST for small business has been doubled to 40 lakhs – business having turnover upto 1.50 crores have been given an option under composition scheme to pay 1 per cent flat rate and to file one annual return
FM underlines 10 most important dimensions that will guide the Government in Vision 2030
To build next-gen infrastructure – physical as well as social – for a 10 trillion dollar economy and to provide #Ease of Living
To build a #Digital India that reaches every citizen, our youth will lead us in this, by creating innumerable startups and jobs
Clean and Green India – an India that drives electric vehicles, with renewables becoming major source of energy, bringing down import dependence and increasing energy security for our people
Expanding rural industrialization using modern industrial technologies, based on #MakeInIndia approach, using grassroot MSMEs and startups across the country
Expanding rural industrialization using modern industrial technologies, based on #MakeInIndia approach, using grassroot MSMEs and startups across the country:
India becoming launchpad of the world, placing an Indian astronaut in space by 2022
Self-sufficiency in food and improving agricultural productivity with emphasis on organic food
Healthy India, with distress-free and comprehensive wellness system for all is the ninth dimension of our vision for 2030
MinimumGovernmentMaximumGovernance, with proactive, responsible and friendly bureaucracy, electronic governance is the 10th dimension of our vision for India for 2030:
Expenditure to rise by 13% from RE 2018-19 to BE 2019-20:
Centrally Sponsored Schemes To Get 3,27,679 Crore In FY20
Amendments proposed to ensure streamlined system for levy of stamp duties, to be imposed and collected at one place, seamlessly Along with completion of fiscal deficit consolidation programme, we will now focus on debt-to-GDP ratio consolidation
56,619 crore made in BE 2018-19 for welfare of SCs and STs, increased to 62,474 crore in RE 2018-19 has been further increased to 76,800 crore in BE 2019-20:
The rebate under section 87A of Income tax Act 1961, which is available since assessment year 2014-15 is raised to ₹12,500 from existing ₹2,500. The amount of rebate is 100% of income tax payable on the total taxable income of up to ₹5 lakh.
A rebate is the amount of tax the tax payer is not liable to pay. Total taxable income or net taxable income is the income after taking into account deductions.
So in next fiscal, if an assessee has an income of up to ₹5 lakh in the financial year, she is allowed to claim the entire tax payable as tax rebate. For instance, if an assessee is having a gross income of ₹6.5 lakh for the financial year 2019-20, and makes an investment of ₹1.5 lakh under section 80C her net taxable income comes down to ₹5 lakh, on which her tax liability would be ₹12,500 (5% of ₹2.5 lakh) excluding cess (income upto ₹2.5 lakh is exempt from tax).
However, as her income is up to Rs5 lakh in the particular financial year, she is liable to claim a rebate of ₹12,500 and thus her net tax payable would be zero. This means while the tax payer is still liable to file her returns, the tax payable is zero.
Around 3 Cr Middle Class Taxpayers Will Get Tax Exemption
“So people earning up to Rs 6.5 lakh may not have to pay tax if they make investments in specified savings. This will provide tax benefit of Rs 18,500 crore to 3 crore people,” he added. Around 3 crore middle class taxpayers will get tax exemption due to this measure, the finance minster said.
TDS Threshold On Rental Income Raised From 1.8 Lakh To 2.4 Lakh Rupees
TDS threshold on interest on bank and post office deposits raised from 10,000 to 40,000 rupees. TDS threshold on rental income raised from 1.8 lakh to 2.4 lakh rupees, said Piyush Goyal at interim budget 2019.
The taxation on property purchase, has become much simpler than it was before. With the roll-out of the Goods and Services Tax (GST), several taxes previously applicable on real estate purchase (VAT, service tax, etc.) have been subsumed under this single unified tax system.
The overall costs involved in buying a property are broadly divided into two components – the first being the one paid to the builder/seller and other, the statutory and legal costs, to the government. While the former roughly comprises 80-85 per cent of the overall property cost, the remaining 15-20 per cent goes as taxes to the government coffers. The taxes are not the same for under-construction and ready-to-move-in properties.
axes on under-construction properties
Statutory and legal costs for under-construction properties vary between 15-20 per cent, depending on the state in question and broadly include stamp duty, registration and GST.
Stamp duty: Stamp duty is paid on the sale agreement, to render a property transaction legal and it varies from state to state.
For example, in Maharashtra, the stamp duty is five per cent (now proposed to be six per cent), while in Karnataka it is currently 5.6 per cent. As such, stamp duty accounts for between five to seven per cent to the total property acquisition cost. Interestingly, most states offer a rebate of one to two per cent to women, if a property is registered in their name.
Registration charges: To register a sale agreement with a government-approved registration officer, buyers have to pay a registration fee of one per cent on the total cost of the property, at the district sub-registrar’s office.
GST: Under the new tax-regime implemented in 2017, under-construction properties are currently taxed at 12 per cent on the base cost of a property. However, the GST Council is mulling reducing this rate, with many anticipating it to be reduced to either eight per cent or five per cent.
TDS (tax deducted at source): TDS is charged at one per cent, for properties priced below Rs 50 lakhs. It is deducted by the buyer, at the time of payment to the seller. Thereafter, the builder needs to pay this amount to the central government online or via any authorised bank, within seven days from the end of the month in which such TDS was deducted.
Case study: Buying a home in Karnataka
Let us take these charges as applicable in Karnataka, to illustrate the calculations for an under-construction property with a super built-up area of 1,000 sq ft (carpet area of 780 sq ft) and priced at Rs 6,000 per sq ft. We will divide the overall cost into the total cost paid to the builder and to the state government.
2. Cost of UDS/land value (One-third of basic cost, as per notification) = Rs 20,00,000
Thus, the total taxable value (basic cost less cost of USD/land value) = Rs 40,00,000
3. BESCOM, BWSSB and legal charges (calculated on per sq ft rate) = Rs 2,50,000
4. GST on water, electricity and other services (18 per cent on BESCOM, BWSSB and legal charges) = Rs 45,000
5. CGST (six per cent of taxable value) + SGST (six per cent of taxable value) = Rs 4,80,000*
Thus, the total cost paid to the builder = Rs 67,75,000 (basic cost + BESCOM/BWSSB/legal + GST + CGST + SGST)
Total cost paid to state government (during registration)
6. Stamp duty = Rs 3,79,400 (5.6 per cent of total cost to builder)
7. Registration charges = Rs 67,750 (One per cent of total cost to builder)
Grand total (Cost paid to builder + stamp duty and registration) = Rs 72,22,150
(* If the GST rate is brought down to eight per cent in the next Council meeting, the new GST cost paid to the government will be Rs 3,20,000 – a reduction of Rs 1,60,000)
Tax benefits of ready-to-move-in properties
One of the major attractions of ready-to-move-in properties, is that they are exempt from GST, provided that the project has been issued a completion certificate. Buyers of such properties need to pay only the stamp duty and registration charges as taxes, which comprise seven to eight per cent of the total property cost.
The seller quotes a lump-sum amount and the buyer also pays the government’s statutory charges during registration. Thus, ready-to-move-in properties offer a good value proposition for home buyers, who not only get to see the property they are buying but can also move in immediately and save on rentals.
Understandably, ANAROCK’s recent consumer sentiment survey indicates that buyer preferences are significantly skewed towards ready-to-move properties. More than 49 per cent of today’s property seekers prefer to buy ready properties, not only to save on costs but also to avoid risks such as delayed project delays and assorted unscrupulous builder activities.
Another tax that a buyer needs to pay, after moving into his or her new home, is the annual property tax. The tax amount varies, not only from state to state, but also according to micro-markets in a city. In case there is an income generated by a property, that too is liable to be taxed. However, if the property is self-occupied, then, only the annual property tax applies.
Tax relief for affordable housing
In a major push to the affordable housing segment, the government has extended a GST benefit to its Credit-Linked Subsidy Scheme (CLSS) for EWS, LIG, MIG-I and MIG-II home buyers. Besides getting an interest subsidy, such buyers can also avail of a lower concessional GST rate of eight per cent.
In fact, to boost sales in this segment, the government has urged developers to refrain from charging any GST from home buyers in this critical segment, because the effective eight per cent GST rate in affordable housing can be adjusted against their input credit, should they opt for this.
How to save on property taxes
Tax deductions and exemptions which, if availed of appropriately, can go a long way in easing a home buyer’s overall financial burden.
Tax deductions on stamp duty and registration charges
While the government charges five to seven per cent of the property cost as stamp duty and registration taxes, one can claim tax deductions on these, under Section 80C of the Income Tax Act, 1961. Buyers can seek a maximum of Rs 1.5 lakhs as tax deduction, provided they fulfil certain conditions. For example, the taxes paid must be in the same year as that of claim, only fully-constructed properties are considered for this exemption and the property must be purchased for self-use and not as an investment.
Tax deductions on home loans
Buyers who avail of home loans, can claim tax deductions under Section 24, 80C and 80EE of the IT Act for repayment on both, the principal and interest amount, after fulfilling certain preconditions:
Tax deductions on interest repayment: Under Section 24, a buyer can avail of deduction of a maximum of Rs two lakhs for the interest portion of the home loan for a self-occupied property. A property that is rented out has no upper limit for tax deduction claim.
Tax deductions on principal repayment: Under Section 80C, one can claim a deduction of Rs 1.5 lakhs on repayment of the principal portion of the EMI paid during the year. However, the owner must not sell the property for at least five years after taking possession, or else, the deduction claimed earlier will be added back to owner’s taxable income in the year of sale.
Additional benefit for first-time home buyers: Under section 80EE, first-time home buyers can claim an additional Rs 50,000 in deduction, provided the loan amount is Rs 35 lakhs or less and the property value does not exceed Rs 50 lakhs.
Tax deductions on joint home loans: In case of a joint loan, each loan holder can claim a deduction of Rs two lakhs for interest paid and up to Rs 1.5 lakhs for the principal amount under Section 80C, provided they are the co-owners of the property purchased via the loan.
Saving tax on rental income
A property purchased for rental income is also subject to tax, but there are ways to save here, as well.
Maintenance charges: An easy way to save tax on rental income, is to outright exclude maintenance charges from the rent received. One only needs to include the maintenance cost in the rental agreement.
Municipal taxes: One can also claim municipality taxes like property tax, sewerage tax, etc., from the rental income, provided these charges are paid by the owner and not by the tenant.
Additional tax benefit for jointly-owned property: In case of a jointly-owned property (usually, by a husband and wife) one can save on taxes quite effectively. For instance, if the wife is not working, the rental income can be divided in the proportion of ownership of the property and thus, one can save on taxes. This can also be beneficial in a scenario, wherein, both are working but are in different tax slabs.
Basic deduction: One of the straightforward ways for owners to save more on a rented-out home, is to deduct an outright 30 per cent of the annual rental income for repair and maintenance of the property, irrespective of the actual expenditure incurred during the year.
(The writer is chairman, ANAROCK Property Consultants)
Home is where the heart is. It is everyone’s dream to own a home, but the burden of EMIs also plays on the mind. Read more to know how the tax benefit on Home Loan can ease your outflow.
A Home Loan Interest Deduction permits taxpayers who own their homes to reduce their taxable income by the quantity of interest paid on the loanwhich is secured by their principal residence. In other words, the outflow of EMIs itself gives you a tax benefit. In fact, from financial year 2014-15, the limit on the amount that you can claim as interest on your home loan deduction has been increased to INR 2 lakh.
Let’s understand the steps you need to take to claim this deduction.
Step 1: GET HOLD OF IMPORTANT DOCUMENTS
Ownership details of the property – You need to be an owner or a co-owner of the property to claim this deduction. The amount of deduction you can claim is based on your share in the property.
Completion of construction or date of purchase of the property – The deduction for interest can be claimed to start the year in which the construction of the property is completed. You can also claim pre-construction interest, which is allowed in 5 equal installments starting from the year in which the house is purchased or the construction is completed.
Borrower Details – You should be the primary or a co-borrower of the Home Loan.
A certificatefrom the bank which displays your interest and principal details.
Municipal taxes paid during the year
Step 2: SUBMIT THESE DOCUMENTS TO YOUR EMPLOYER
If you claim interest on Home Loan Deduction, your employer will adjust your TDS deductions accordingly. Do make it a point to inform your employer.
You are not required to submit these documents to the Income Tax Department.
Step 3: CALCULATION OF INCOME FROM HOUSE PROPERTY
In a case of a self-occupied house property, the amount of deduction is limited to INR 2 lakh. However, for a let out house property, there is no limit on the amount of interest you can claim as a deduction. But from FY 2017-18 onwards, the deduction for home loan interest on let out property is also limited to the extent to which loss of such house property does not exceed INR 2 lakh.
Here are the steps to calculate your income from House Property
Gross Value of the property (nil in case of Self Occupied Property and Rental Value if rented)
Municipal Taxes actually paid
Standard Deduction (30% of Net Annual Value)
Deduction for interest on home loan
= Income from House Property
You can also use the Income Tax Calculator
Step 4: CLAIM INTEREST ON HOME LOAN DEDUCTION AND PRINCIPAL REPAYMENT
In case there is Principal Repayment by you during the year (check your loan installment details), principal repayments are allowed to claim interest on home loan deduction under Section 80(C). However, the total amount allowed to be claimed under section 80(C) is capped at INR 1.5 lakh.
Union Budget 2018 will be very crucial, especially for real estate sector, as it would be the last full budget before the Modi government faces re-election in May 2019.
The Modi government introduced a series of reforms, with Real Estate Regulation Act (establishing a regulator, RERA, in each state and UT) and Goods and Services Tax (GST) focused on reviving the real estate sector in particular and the economy in general.
These two measures have brought in transparency and opened up the sector as a secure investment asset class for institutions and individuals alike.
At the same time, the government defined the affordable housing segment clearly to give benefit to the sector. Subsidy under Prime Minister Awas Yojana (PMAY) and tax benefit to developers in construction of affordable housing under Section 80IBA have revived the affordable segment of the sector.
But the sector is still languishing and requires a push at the policy level, a number of consultants like JLL India, ICRA, Grant Thornton, RICS, Naredco (National Real Estate Development Council), and developers have said.
All these reforms in last couple of years have given a solid platform for the real estate sector to perform and contribute to the GDP in a significant manner, but further tweaks in existing laws and additional incentives can give the necessary fillip to the sector to grow faster, NeerajSharma, director of Grant Thornton, said.
The expectation from the forthcoming Union Budget is multifold: Increase the demand and supply, so that the country can realize PM Modi’s dream programme of “Housing for all by 2022”.
Provide additional money in the hands of tax payers, the customers, and make the processes in real estate more seamless and quicker.
Make the real estate attractive for both kinds of customers – those who aspire to buy their first house and those who view it as an attractive investment class.
BUDGET 2018 MUST DELIVER!
As shown in the chart on page1, consultants say that the government should use the sector not only to revive the economy, but also to incentivize individual investments in creating wealth.
ICRA said that expansion of the income tax deductions available to homebuyers can be used to incentivize them, especially the first-time buyers.
MrinalKumar, partner in Shardul Amarchand Mangaldas, said they expect the government to enhance the deduction against the interest paid on home loan taken to buy a house, from the existing cap of Rs 2,00,000 per annum, in Budget 2018.
They also say that the deduction against the interest paid on the home loan taken to invest in the housing sector should be allowed on the actual basis; especially in a market where return on capital from rentals of a residential property is around 2%, tax incentive must be given to promote investment in the sector.
With the floating, young working population on the rise, the requirement for rental housing would increase in the times to come.
Just two weeks before the Budget, GST Council is expected to consider a reduction in tax rates for some items, about 80 going by some reports, and the inclusion of real estate in its 24th meeting tomorrow.
The meeting comes amid continuous dip in GST revenue collection in the last two months. The collection registered a sharp dip to Rs 80,808 crore in November, from Rs 94,063 crore in the launch month in July last year.
Change in tax rates
As Budget can no more tinker with indirect taxes due to implementation of GST, the Council is expected to announce tax concessions and reduction of tax rates on common man items and services, including household goods, agriculture products, housing sector inputs such as cement and steel.
Real estate in GST:
The Council is likely to discuss inclusion of real estate under GST and announce the rollout date for the same. According to some reports, Council may set a 12 per cent rate for the real estate sector and may also decide to subsume stamp duty and registration charges in GST. The likely date for inclusion of real estate under GST could be the start of new financial year, April 1.
“Discussion of real estate inclusion in GST is the key agenda of the GST Council which is scheduled to meet on January 18th,” a senior government official told ANI.
Single GST return form
It may also announce simplification of return filing process. The three return forms — GSTR1, GSTR2 and GSTR3 — may be clubbed into a single form for easier return filing.
This would drastically reduce the compliance burden on the tax payers as they will have to file 12 returns a year instead of 37 returns currently.
Since GST rollout in July, government has extended return filing dates many times. Rollout of e-way bills
At the last GST council meeting in December, roll out of e-way bill was decided for February 1. So the council may iron out issues in e-way bill mechanism for smooth implementation of e-way bills from next month.
Gifting is an act, through which a person voluntarily transfers certain rights in an asset to another person, without any consideration. Gifting of a house property, has certain income tax and stamp duty implications.
Legal requirements for gift
As per the Transfer of Property Act, the transfer of a house property under a gift, has to be effected by a registered instrument/document, signed by or on behalf of the person gifting the property and should also be attested by at least two witnesses. The registrar shall ensure that proper stamp duty has been affixed on the gift deed/document, when it is presented for registration. The amount of stamp duty and registration charges payable, with respect to a gift deed, are generally the same as in the case of a regular sale. However, if the gift deed is executed between some specified close relatives, some states provide concessions in stamp duty. For example, Maharashtra used to have a cap on stamp duty payable on gift of a residential or agricultural property to one’s spouse, children, grandchildren or wife of a son who has died, at Rs 200, till May 16, 2017. Now, the stamp duty applicable is three per cent of the market value of the transaction.
Income tax implication
According to income tax laws, the value of all the gifts received by a person during a year is fully exempt, as long as the total of such gifts does not exceed Rs 50,000 in a year. If the value of all the gifts taken together exceeds Rs 50,000, then, the aggregate of the gifts received become taxable without any threshold exemption. However, income tax laws also give a favourable treatment, to gifts between two close relatives. Consequently, the gift of any asset (whether movable or immovable) made to certain specified relatives, is fully exempt from tax in the hand of the recipient, without any upper limit. The list of close relatives includes parents, spouse, siblings, siblings of the spouse, lineal ascendants and descendants of the person and his/her spouse. The list also includes spouse of the abovementioned persons.
If the house property is received as a gift from a relative, the first incidence of tax will arise, when you sell the property. The cost for the purpose of income tax, shall be the taken as the cost that was paid for the property by any of the previous owners. The profits shall be treated as short-term or long-term, depending on whether the aggregate of your holding period as well as that of the previous owner who had actually paid for it, is more than 36 months or not.
If the holding period as computed above is less than 36 months, the profit accrued on the sale of such property, shall be treated as short-term and will be added to your regular income and taxed at the applicable slab rate. However, if the holding period is more than 36 months, you will get the benefit of indexation on the cost of the property, as well as the option to claim exemption from payment of 20% long-term capital gains tax, by investing in a residential house or in capital gains bonds of Rural Electrification Corporation (REC) or National Highway Authority of India (NHAI).
Article 14 of the Indian Constitution mandates equality among all its citizens. With the interesting interplay of socio-legal forces, Hindus, Muslims and Christians in India are governed by their respective personal laws – which includes property rights as well. As Muslims in the country do not have codified property rights, broadly speaking, there are governed by either of the two schools under the Muslim law – the Hanafi and the Shia. In India, a large number of Muslims are Hanafis or Sunnis. While the Hanafi school recognises only those relatives as heirs whose relation to the deceased is through a male. This includes son’s daughter, son’s son and father’s mother. The Shia school, on the other hand, favours no such discrimination. This means that heirs, who are related to the deceased through a female are also accepted.
A few general rules of inheritance for women are:
Under the Muslim law, the laws of inheritance are rather strict. In keeping with its ideology that a woman is half the worth of a man, a son takes double the share of a daughter. But the daughter is the absolute owner of whatever property she inherits. If there is no brother, she gets half a share. It is legally hers to manage, control, and to dispose off according to her wishes.
She is eligible to receive gifts from even from those she would inherit from. This is contradictory because she can inherit only one-third of the man’s share but can get gifts without any hassle.
Till a daughter is not married, she enjoys the right to stay in her parents’ house and seek maintenance. In case of a divorce, charge for maintenance reverts to her parental family after the iddat period (approximately three months) is over. But, if her children are in a position to support her, the responsibility falls on them.
In the famous Shah Bano case, the Supreme Court had held that in case of a divorce, it is the responsibility of the husband to make reasonable and fair provision to maintain his former wife even after separation under Section 3 (1Ha) of the Muslim Women (Protection of Rights on Divorce) Act, 1986. This period extends beyond iddat as the woman retains control over her goods and properties.
In the event of the death of her husband, a widow gets the one-eighth share (when there are children) but will get one-fourth share (if there are no children). If there is more than one wife, the share may diminish to one-sixteenth.
A Muslim mother is entitled to inheritance from her children, if they are independent. She is eligible to inherit one-sixth of her dead child’s property if her son is a father as well. In the absence of grandchildren, she would get the one-third share.
There are other provisions, too, in the law which ensure financial security of a Muslim woman.
The maher (entitlement)
This is the total money or property that a wife is entitled to get from her husband at the time of marriage. There are two types of maher: prompt and deferred. In the former case, the amount is given to the wife immediately after marriage; in the later, the amount is given to the wife when her marriage has ended, either upon the death of her husband or by divorce.
The wasiyat (will)
A Muslim cannot give away more than one third of his/her total property through a will. In circumstances where there are no heirs in the estate as prescribed by law, the wife may inherit a greater amount by will.
The hiba (gift)
Under the Muslim law, any type of property may be given as a gift. For a gift to be valid, a declaration of the wish to make the gift must be made which should be accepted by the receiver.
After a hectic day of parleys and opinion from the attorney general, the government feels it retains power to levy excise duty on goods other than petroleum even after the provision of the Constitution amendment law was notified on September 16.
A top government source told ET that transitional amendment in the Constitution (122nd Amendment) (GST) Act, 2014, to roll out the goods and services tax (GST) would tax (GST) would provide cover to the government till the time this reform is implemented.
“We have had discussion with AG and he opined that there is no problem with the notification,” the official said citing Section 19 of the amendment.
This provision says: “Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force in any state immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act, shall continue to be in force until amended or repealed by a competent legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier.”
The official said there are some constituents that need to be seen in the notification.
Firstly, the Section 19 says tax on goods and services to be tax ed in any `state’, which refers to geographic entity of state and not by states. Secondly, withdrawal of power to levy tax lies with the competent authority and not the state legislature.
This protects the power to impose central levy during the transitional period of one year.
Revenue secretary Hasmukh Adhia tweeted: “The department of Revenue examined the validity and implications of notfns dated 10th and 16th Sept wrt existing taxes imposed by the Union and states. “There is no legal infirmity in these notifications. Law dept has confirmed that there appears to be no legal requirement to issue any further clarification or notification in this regard.”
ET had reported on Monday that massive confusion had arisen after the Centre notified certain provisions in the constitution amendment law for GST with effect from September 16.
The notification said the government will not levy excise on goods other than petroleum products from this date, implying loss of power to tax other goods.The notification also binds states to accept GST within a year or they will lose power to tax.
The Constitution (122nd Amendment) (GST) Act, 2014, passed by Parliament last month to roll out GST, has made changes in Entry 84 of List 1 or the Union List of the 7th Schedule of the Constitution.
Essentially, the amended list provides that excise duty can be levied only on petroleum and its products and tobacco and tobacco products, thereby limiting Central Excise Act’s scope to these specified products.
Experts felt through this notification the government had surrendered power to levy excise except in goods mentioned.
The government is considering a price-monitoring mechanism under the proposed goods and services tax (GST) to ensure that the multiple benefits of the landmark reform are passed on and head off any unwarranted price shocks. States are also keen to ensure that the effects of GST provide a demand push to the economy.
“A mechanism will be put in place to keep a tab on prices,” said a senior official aware of deliberations before the GST Council meets later this week to decide on key issues, including the tax rate.
The government is keen to put GST in place on April 1, 2017. The incidence of tax on goods is expected to fall sharply under GST, widely seen as India’s biggest reform since independence.
It will replace multiple central and state taxes, creating a national market. GDP growth is expected to get a boost of up to 2 percentage points from the reform with the bulk of benefits going to industry that will see logistics costs and taxes decline.
The government wants to guard against profiteering by companies that will benefit from seamless input credit or tax on tax. This was among the points raised by some members of the empowered committee of state finance ministers at its last meeting.
Tax experts said a price-monitoring system without legislative backing may not be effective but suggested additional compliances that could be imposed.
“The government clearly wants to ensure that GST does not lead to price increase and inflation. However, I am not sure if any price monitoring system would be effective, particularly if it does not have legislative backing,” said Siddharth Mehta, partner, PwC India.
He said this could lead to complicated compliance paperwork and avoidable disputes between government and industry and the former should instead ensure that the GST rate is moderate and credit system smooth.
LOW TAX RATE
The implementation of GST in some countries fuelled inflation and the government is keen to prevent a similar situation by starting with a low tax rate.
ET view: Broaden the Tax Base
A price monitoring mechanism is fine. But the government should desist frequent tinkering of rates to grant sector specific sops. Some experts favour setting GST rates low to start with. The other option is to have multiple rates. This makes eminent sense and will work in India just as in the EU where VAT rates vary across member states. Including large chunks of the economy in the tax base and keeping sops to the minimum will help lower GST. A wider base gives leeway to lower GST that allows credit for input taxes paid across the value chain, makes production efficient and lowers retail prices.
CHANDIGARH: With a view to boost the real estate sector, the Punjab Cabinet decided to abolish the stamp duty of two per cent levied on immovable property while awarding the power of attorney.
A decision to this effect was taken by the Cabinet in a meeting held under the chairmanship of chief minister Parkash Singh Badal here.
Speaking on the matter, a spokesperson of the chief minister’s Office said the decision would be a major relief for people aspiring to buy their own houses.
The stamp duty would now be a nominal Rs 1000 on the General Power of Attorney and Rs 500 on Special Power of Attorney, irrespective of the market value.
In another major decision, Cabinet decided in principle to offer the proprietary rights under concessional terms and conditions to the small and marginal agricultural farmers cultivating up to five acres of provincial government agricultural land.
These tillers who have been cultivating government land for at least 20 years would be entitled to allotment at significant discount from the collector rates.
The Cabinet also gave nod for appointing Senior Vice President in the various boards and corporations from among the non-official members.
Following this decision, the Cabinet approved the creation of post of Senior Vice Chairman in Punjab State Board of Technical Education and Industrial Training and Punjab Khadi & Village Industries Board.
It was also decided in the meeting to constitute a Cabinet sub committee comprising Food and Civil Supplies Minister and Finance Minister to negotiate with banks for a lower rate of interest on previous loan accounts.
The Cabinet also approved the proposal mooted by the local government department to make suitable amendment in the Punjab Municipal Act, 1911 and the Punjab Municipal Corporation Act, 1976 for the disposal of Municipal properties under possession of occupiers for a period of twenty years or more.
In the meeting, the Cabinet also decided to make amendments in the rates of property tax of hotels in the urban areas from the year 2015-16 by including this type in the category of commercial property.
There are several benefits to buying a property in a woman’s name, either as the sole owner or as a joint owner, with governments and banks offering several sops.
“Aspiring home buyers can seek certain benefits including tax exemptions, if a home is bought in a woman’s name. Such offers can also attract more women buyers to the realty sector,” points out Ashok Mohanani, CMD, Ekta World. Encouraging women to register assets in their name, also boosts women’s empowerment, he adds.
Experts explain that some of the obvious tax benefits of buying a home in the wife’s name, include an extra deduction of interest up to Rs 1.5 lakh every financial year, if the house is self-occupied. If a husband and wife are the joint owners of a property and if the wife has a separate source of income, then they can both claim tax deductions individually. The tax benefit will depend on the ownership share of each co-owner.
Discount on stamp duty charges
Several state governments in north India are now offering a partial waiver on stamp duty, for buyers registering properties in a woman’s name – either as a sole owner or as a joint owner.
“You can save 1%-2% on stamp duty, if the property is in a lady’s name. In Delhi and Haryana, the stamp duty rate is 4% for women, compared to 6% for men. Moreover, if you are undergoing some financial setback and have some debts to repay, the property held in your wife’s name, does not come under the cover for your loss,” points out Sushil Raheja, CEO of Raheja Homes Builders & Developers.
Stamp duty charges for Women Vs Men
3% to 6%
up to 7%
* As 1% rebate over normal rate
Discount on home loan interest rates
Many banks like SBI, ICICI and HDFC Bank, offer discounted rates on home loans for women borrowers. The prevailing interest rates for women borrowers are as mentioned below:
Interest rate for woman borrower Vs others
Interest for Women borrower
Interest Rate for others
Note: For amount < Rs 1 Cr
Things to keep in mind when buying a home in the wife’s name
Experts maintain that it is a good idea to buy a home in the name of one’s wife or in co-ownership. However, the wife can enjoy the tax benefit, only if she has a separate and genuine source of income. Moreover, if there is any legal dispute on the property, then both, the husband and wife, will be involved in the case. Therefore, home buyers should evaluate all possibilities, before making a final decision.
In order to check the rampant use of black money in immovable property transactions, the government of India has introduced a law, wherein, the purchaser of a property has to deduct tax at source, while paying the seller for his property.
Properties that are covered
Section 194I A of Income Tax Act, requires a buyer to deduct tax at the rate of 1% of the sale consideration, if the value of the transaction is Rs 50 lakhs or more. This section covers residential property, commercial property, as well as land. However, transactions pertaining to the purchase of agricultural land, are not covered under this provision.
When to deduct the TDS and how to pay it
The purchaser of the property has to deduct the TDS, either at the time of executing the conveyance deed, or at the time of payment of advance in case any advance is being paid before the execution of the conveyance deed. The buyer has to deposit the TDS amount to the credit of the central government, within 30 days from end of the next month in which the tax is so deducted. For payment of the TDS and furnishing other particulars, you have to fill in Form-cum-challan No 26QB. If a property has more than one buyer and/or seller, you need to fill in separate Form 26QB for each set of buyer and seller. The details of all buyers and sellers, have to be submitted in each Form 26QB.
Generally, every person who is responsible for deducting TDS has to obtain a TAN (tax deduction account number). However, in case of TDS on immovable property, the buyer does not have to obtain the TAN. You need to provide details like name, address, PAN, mobile number and email id of the seller as well as buyer, in Form 26QB. You also need to provide the complete address of the property, along with the date of agreement, total value of consideration, date of payment, etc.
The buyer should ensure that the PAN of the seller is correct. Otherwise, the seller will not be able to get the credit for tax deducted by the buyer, as the credit shall flow on the basis of PAN card details furnished in Form 26QB.
The TDS can be paid online or deposited offline, by tendering the physical challan to an authorised bank. The bank will then update the details on the income tax department’s website. Once the TDS has been deposited, the buyer has to download the TDS certificate in Form No 16B, from the website of the Income Tax Department and furnish it to the seller within 15 days.
Lower deduction or nil deduction of TDS
Some TDS provisions provide for the payee to either approach the income tax officer for issue of a certificate, so that the payer shall deduct tax at a lower rate or nil rate, or in some cases the payee can just furnish a declaration for nil TDS. However, there is no such provision for TDS on immovable property. The buyer has to mandatorily deduct tax at source, where the consideration exceeds Rs 50 lakhs, in respect of each set of buyer and seller.
There are a number of income tax provisions, which link the benefits with the time taken to complete the construction of one’s property.
Deductions pertaining to repayment of the principal component of a housing loan
Section 80C provides tax benefits on the repayment of a home loan’s principal component, up to Rs 1.50 lakhs. In case of an under-construction property or for self-construction of a property, your EMIs do not start till the entire loan amount is disbursed and this generally coincides with the completion of construction. In case of any inordinate delay in construction, your EMI may start even before completion of the construction. In such a situation, you will not be able to claim tax benefits on principal repayments, as the same is allowable only in respect of a property, income from which is taxable under the head ‘income from house property’. Unless the property is completed and its possession taken, the same cannot become taxable. Therefore, in case of such delays, you lose the benefit available on repayment of the principal amount of the loan, before taking the possession.
Deductions pertaining to interest paid on loan taken for construction of a house property
Section 24 of the Income Tax Act provides deductions, with respect to the interest paid on money borrowed for the purchase, construction, repairs, renovation or reconstruction of a house. Unlike Section 80C, Section 24 allows you to claim tax benefits on the interest paid during the period before you took possession (referred to as pre-EMI interest), in five equal instalments beginning from the year of completion of construction. Consequently, if there are delays in completion of construction, your right to claim the interest paid on the loan will also be delayed.
Moreover, the period taken for completion of the construction, will also determine the amount which you can claim for interest, in case the house is self-occupied. If construction is completed within five years from the end of the financial year in which the money was borrowed, you can claim interest up to Rs 2 lakhs. However, in case the delay exceeds five years, your entitlement gets curtailed to Rs 30,000 in a year.
This amount of interest entitlement is for the current year’s interest, as well as for amortised portion of the pre-EMI interest, taken together. It may be noted that for a let-out property, you can claim full interest benefit, even if construction is delayed.
Importance, for claiming exemption on capital gains
Section 54 and 54F provide for exemption from long-term capital gains tax, if the gains are invested in a new house that is constructed within three years. However, in the case of Kishore H Galaiya Vs ITO, decided in 2012, the Mumbai tribunal held that even if a substantial amount is invested/spent for construction of the house and even though construction is not completed in three years, the exemption under Section 54 and 54F would be available. However, in case of delay in completion of construction, the income tax officer may take a different view and you may have to file an appeal with a higher authority, to claim the exemption. Hence, it is always advisable to ensure that the construction is completed within three years, to avoid any litigation.
Taxes and duties constitute a large part of the total home buying cost. There are four types of taxes and duties that are levied on the purchase of homes in India – stamp duty, value-added tax (VAT), service tax (ST) and registration charges. The rate or amount of stamp duty, VAT and registration charges, may vary from state to state, whereas service tax comes under centre’s control.
Stamp duty is payable to the state government. Payment of this duty denotes the legal status of the transaction. A sale agreement that is not appropriately stamped, is not acceptable as confirmation in the court of law.
Value-added tax (VAT)
“VAT is typically levied on the sale of goods and is applicable for house property, as it involves the transfer of ownership rights from the seller to the buyer. It is pertinent to note that VAT is applicable, only in the case of under construction properties,” explains Gautam Saraf, managing director, Mumbai, Cushman & Wakefield.
The agreement executed between the buyer and seller (owner/developer) of a house property, should compulsorily be registered, as per the Registration Act. If the agreement is not registered, it is not admissible as evidence in a court of law.
Service tax is payable to the central government. This charge is only applicable for under construction properties. Service tax is charged at a specific rate on the basic cost of the property (cost of land and construction) and at a different rate on other cost items, such as preferential location charges, floor rise charges, initial maintenance charges, club house, etc.
“Payment of stamp duty and registration charges is the responsibility of the buyer. However, due to poor market conditions in recent times, some developers have offered to bear this cost. With respect to service tax and VAT, it is the responsibility of the developer to collect it from the buyer and deposit it with the concerned department,” informs Nishant Agarwal, MD, Avighna India.
If the stamp duty and registration charges are not paid, the registration procedure itself will not be complete and therefore, the property would not be legally transferred in the name of the buyer.
Are taxes the same for all classes of home buyers?
According to experts, most of the above taxes and charges are applicable on a similar basis, to all categories of home buyers, except for service tax. The service tax brackets are as follows:
If the value of the house property is more than Rs 1 crore, then the service tax chargeable is 4.50% on the sale consideration and 15% on floor rise and other charges.
If the value of the house property is less than Rs 1 crore, then, the service tax chargeable is 3.75% on the sale consideration and 15% on floor rise and other charges.
Taxes on an under-construction Vs ready-to-move-in home
Agarwal further explains, “From a tax perspective, the following points are important for home buyers:
In the case of an under-construction property, all the taxes are applicable.
In the case of ready-to-move-in homes, where the buyer is buying from a developer and the occupancy certificate and completion certificate have been received, service tax is not applicable.
In the case of ready-to-move-in homes, where the buyer is not buying from a developer, service tax and VAT are not applicable.”
The law of registration of documents is contained in the Indian Registration Act. This legislation provides for the registration of various documents, to ensure conservation of evidence, prevention of fraud and assurance of title.
Documents of property requiring mandatory registration
As per Section 17 of the Registration Act, 1908, all transactions that involve the sale of an immovable property for a value exceeding Rs 100, should be registered. This effectively means that all the transactions of sale of immovable property have to be registered, as no immovable property can be purchased for merely Rs 100. Additionally, all transactions of gift of an immovable property, as well as lease for a period exceeding 12 months, are also mandatorily required to be registered.
In special cases, when a party to the transaction cannot come to the sub-registrar’s office, the sub-registrar may depute any of its officers to accept the documents for registration, at the residence of such person. The term ‘immovable property’ includes land, buildings and any rights attached to these properties.
The property documents that need to be registered, should be submitted to the office of the Sub-Registrar of Assurances within whose jurisdiction the property, which is the subject matter of transfer, is situated. The authorised signatories for the seller and the purchaser, have to be present along with two witnesses, for registration of the documents.
The signatories should carry their proof of identity. The documents that are accepted for this purpose, include Aadhaar Card, PAN Card, or any other proof of identity issued by a government authority. The signatories also have to furnish the power of authority, if they are representing someone else. In case a company is party to the agreement, the person representing the company has to carry adequate documents, like power of attorney/letter of authority, along with a copy of the resolution of the company’s board, authorising him to carry out the registration.
You need to present the property card to the sub-registrar, along with the original documents and proof of payment of stamp duty. Before registering the documents, the sub-registrar will verify whether adequate stamp duty has been paid for the property, as per the stamp duty ready reckoner. In case there is any deficit in the stamp duty, the registrar will refuse to register the documents.
Time limit and fee payable
Documents that have to be mandatorily registered, should be presented within four months from the date of their execution, along with the requisite fee. In case the time limit has expired, you can make an application to the sub-registrar for condonation of the delay, within the next four months and the registrar may agree to register such documents, on payment of a fine that may be up to ten times the original registration fee. The registration fee for property documents is 1% of the value of the property, subject to a maximum of Rs 30,000.
Earlier, the documents that were presented for registration, would be returned to you after a period of six months. However, with computerisation of the offices of the sub-registrar, the documents (bearing the registration number and proof that the documents have been registered by the registrar) are scanned and returned to you on the same day.
Impact of non-registration
Failure to register the purchase agreement of a property, could put you at a huge risk. Any document that is mandatorily required to be registered but is not registered, cannot be admitted as evidence in any court of law.