Union Budget 2024: Here’s a wishlist from real sector for tax relief, tax incentives

Union Budget: There is a considerable amount of anticipation and speculation surrounding the potential benefits that various sectors are expecting from the Finance Minister. Union Finance Minister Nirmala Sitharaman is scheduled to present the Budget for the fiscal year 2024-2025 in the third week of July. The Budget is expected to include a breakdown of anticipated government revenues and expenses in different sectors. 

The real estate industry in India is particularly interested in potential reforms, tax relief and incentives that could stimulate growth and tackle persistent issues that have been present for a long time.

Here’s a list of things the real estate sector is expecting this time:

In the 2024-25 Interim Budget, Finance Minister Nirmala Sitharaman announced a boost for India’s affordable housing sector by adding 2 crores more houses to the flagship scheme PMAY-U (Pradhan Mantri Awas Yojana – Urban). CA (Dr.) Suresh Surana revealed his expectations in terms of tax incentives to boost the real estate market:

i.  Section 80C:  It allows taxpayers to claim deduction up to an aggregate threshold of Rs 1.50 lakh against various expenses such as stamp duty paid, principal repayment of loan acquired to purchase/construct residential property etc. Since such a quantum has not been enhanced for many years, the government may bring it in line with the inflation and additionally bring investment in REITs under the scope of 80C deduction.

ii.  Section 24(b): This act helps the taxpayer to claim interest on borrowed loans for two self-occupied house properties. In case of such deduction, the aggregate monetary limit is at Rs 2 lakh for both properties cumulatively. It is expected that the provisions be rationalised and the benefit of the Interest deduction of up to Rs 2 lakh should either be removed or enhanced to at least Rs 4 lakh.

iii. Capital gains taxation: The Government may consider relaxing the capital gains taxation on sale of units of REIT. Currently, the units of REITs held by an investor can be termed as long-term capital assets only if they are held for more than 36 months. Such holding period can be reduced to 12 months to be brought at par with the listed shares. Moreover, deduction benefit under Section 80C can also be provided for the investment made in the REITs in order to enhance the retail investor participation.

iv. New tax Regime: Individual taxpayers opting for the New tax Regime are not allowed to setoff loss from house property against any other head of income. Due to stability in real estate market, many individuals have opted for purchase of house property and most of those who have taken a housing loan are incurring interest costs on their newly owned property. Thus, if the new tax regime also allows individuals to setoff such interest losses against salary income, they will be incentivized to opt for the new regime.

v. Tax benefit under Section 80-IBA: Section 80-IBA provides for deduction for profits generated from the business of developing and building affordable housing projects. It is expected that the period of project approval by competent authority may be extended from 31st day of March 2021 to 31st day of March 2024. Extending the timeframe required for claiming the tax benefit under Section 80-IBA to at least 7 years from the current 5 years, given the prevailing conditions in the country, could incentivize developers to invest more in affordable housing projects. This extension of the tax holiday period beyond the existing timeline could potentially boost investments in this crucial segment.

vi. Tax deduction on home loan: The government may introduce interest subvention schemes or tax deductions on home loan interest rates for first-time homebuyers could boost demand. These measures, if implemented thoughtfully, could contribute to the growth and stability of the real estate sector in India, fostering both supply and demand while attracting more investment into housing and infrastructure development.

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