Make rentals tax-free - India
The Times of India
Credai, in a proposal to the finance ministry, emphasised on promoting housing as a viable 'investment' alternative for attractive rental income. Also, there is a greater need to promote housing for low income group on war footing, the memorandum said. In order to achieve this, CREDAI said that incentive should be provided by way of deduction of 20 percent of the investment made in the housing sector from taxable income. By allowing this benefit, the note said, the expected loss of income tax collection will be made-up by increased collection from indirect taxes.
The proposal also suggested that rental income from newly constructed let-put houses, with the area of each unit not exceeding 150 square metres, be exempted from income tax at the rate of 100 percent for the first five years and 50 percent for the next five years. The Confederation argued that divided or interest income from infrastructure projects is fully exempt for investors under section 10(23G). Similarly, return on investments in shares and mutual fund units s also exempt under Section 10(34) and 10(35), though under Section 1150 dividends bear a nominal tax at the rate o 10 percent. Thus, there would be nothing unusual if complete exemption is provided to the rental income to promote new housing, argued the note. The proposal also suggested to do away with the ceiling on deduction of interest on loans raised for acquiring self-occupied house properties. At present, it is put at Rs 1.50 lakhs.
Other measures suggested by the confederation are:
• The benefit of enhanced depreciation to employee houses is withdraw n with the intro-
duction of new rates of depreciation. This half-way withdrawal has affected the demand for employee housing. Therefore, it is suggested to restore this benefit and allow it to all.
• The restriction for exemption under wealth tax be removed and the whole of investment in houses be made wealth tax free
• Provisions under Section 50C for capital gains computation be repealed and apparent consideration, as in the case of shares and securities, be allowed. This is necessary because valuation by stamp authorities is normally unrealistic and exorbitant. Besides, this provision is very much litigation-oriented
• Removal of additional burden of service tax imposed in budget 20054)6. This appears to be a retrograde step which is definitely going to push up the prices of houses, noted the memorandum. Other agencies connected to the real estate industry are also charging the service tax. Even the computation of the exact burden is un-clear The provision is likely to cause thousands of litigations in assessment. The suggestion is therefore to do away with service tax, at least in respect of housing. This step will naturally give a relief to the common purchaser by five to eight percent in the overall pricing. There is no objection if service tax is retained in respect of commercial premises.
• To remove the ceiling of one acre land for non-metro cities. Normally, in the small cities, housing projects are not of the scale of one acre. Therefore, in small cities, the introduction of Section 80 IB (10) has not so far shown much impact. Hence, in order to repeat the success of urban housing affordability and availability in small cities also, it is suggested to scrap the minimum plot area limit of one acre
• To promote slum area redevelopment and low cost housing, CREDAI suggests Special Export Zone type of benefits (like exemption from excise and sales tax on inputs and from stamp duty on first allotment) to the slum area redevelopment and low cost housing projects
• Like other priority industries, the housing industry also be allowed finances at concessional rates of interest
• Allow foreign nationals (not of the Indian origin only) to purchase and invest in the properties in India which is prohibited by the recent guidelines in the FEMA
• The present stipulation of 100 acres for FDI in integrated townships should be relaxed to 20 acres
• Retail and commercial real estate will also herald major investments both in trade and commerce. FDI should be allowed in dedicated retail and commercial real estate projects
• Incentives for setting up of multiplexes have given a boost to the ailing entertainment industry
Further, incentives should be provided to set up multiplexes and convention centres, suggested the memorandum.
Source: Times Property
The Times of India
Credai, in a proposal to the finance ministry, emphasised on promoting housing as a viable 'investment' alternative for attractive rental income. Also, there is a greater need to promote housing for low income group on war footing, the memorandum said. In order to achieve this, CREDAI said that incentive should be provided by way of deduction of 20 percent of the investment made in the housing sector from taxable income. By allowing this benefit, the note said, the expected loss of income tax collection will be made-up by increased collection from indirect taxes.
The proposal also suggested that rental income from newly constructed let-put houses, with the area of each unit not exceeding 150 square metres, be exempted from income tax at the rate of 100 percent for the first five years and 50 percent for the next five years. The Confederation argued that divided or interest income from infrastructure projects is fully exempt for investors under section 10(23G). Similarly, return on investments in shares and mutual fund units s also exempt under Section 10(34) and 10(35), though under Section 1150 dividends bear a nominal tax at the rate o 10 percent. Thus, there would be nothing unusual if complete exemption is provided to the rental income to promote new housing, argued the note. The proposal also suggested to do away with the ceiling on deduction of interest on loans raised for acquiring self-occupied house properties. At present, it is put at Rs 1.50 lakhs.
Other measures suggested by the confederation are:
• The benefit of enhanced depreciation to employee houses is withdraw n with the intro-
duction of new rates of depreciation. This half-way withdrawal has affected the demand for employee housing. Therefore, it is suggested to restore this benefit and allow it to all.
• The restriction for exemption under wealth tax be removed and the whole of investment in houses be made wealth tax free
• Provisions under Section 50C for capital gains computation be repealed and apparent consideration, as in the case of shares and securities, be allowed. This is necessary because valuation by stamp authorities is normally unrealistic and exorbitant. Besides, this provision is very much litigation-oriented
• Removal of additional burden of service tax imposed in budget 20054)6. This appears to be a retrograde step which is definitely going to push up the prices of houses, noted the memorandum. Other agencies connected to the real estate industry are also charging the service tax. Even the computation of the exact burden is un-clear The provision is likely to cause thousands of litigations in assessment. The suggestion is therefore to do away with service tax, at least in respect of housing. This step will naturally give a relief to the common purchaser by five to eight percent in the overall pricing. There is no objection if service tax is retained in respect of commercial premises.
• To remove the ceiling of one acre land for non-metro cities. Normally, in the small cities, housing projects are not of the scale of one acre. Therefore, in small cities, the introduction of Section 80 IB (10) has not so far shown much impact. Hence, in order to repeat the success of urban housing affordability and availability in small cities also, it is suggested to scrap the minimum plot area limit of one acre
• To promote slum area redevelopment and low cost housing, CREDAI suggests Special Export Zone type of benefits (like exemption from excise and sales tax on inputs and from stamp duty on first allotment) to the slum area redevelopment and low cost housing projects
• Like other priority industries, the housing industry also be allowed finances at concessional rates of interest
• Allow foreign nationals (not of the Indian origin only) to purchase and invest in the properties in India which is prohibited by the recent guidelines in the FEMA
• The present stipulation of 100 acres for FDI in integrated townships should be relaxed to 20 acres
• Retail and commercial real estate will also herald major investments both in trade and commerce. FDI should be allowed in dedicated retail and commercial real estate projects
• Incentives for setting up of multiplexes have given a boost to the ailing entertainment industry
Further, incentives should be provided to set up multiplexes and convention centres, suggested the memorandum.
Source: Times Property