The Union Budget 2020-21 was held on February 1st and it was the second budget in the second term of the current government. There were many surprises for the real estate sector this year and several demands were expected to get addressed in the budget 2020; however, some caught the eye of the minister.
Let’s take a look at some of the key announcements made in the budget and its impact on the realty sector.
In the Budget 2019, the government had introduced a tax reduction for affordable home buyers under section 80EEA, for deduction up to INR 1.5 lakhs against interest payment until March 31, 2020.
However, to ensure more people avail this advantage, the 2020 budget further extended the benefit under section 80EEA till March 31, 2021. Thus, the total tax deduction given on such interest paid stays one more year, and this is expected to positively impact the demand in the affordable housing segment.
Also, a tax holiday is given on the profits earned by the developers of affordable housing projects. This is approved until March 31st 2020. This has also got a year’s extension.
This year INR 100 lakh crore would be invested on infrastructure for the next five years. It comprises of more than 6500 projects across divisions such as housing, safe drinking water, access to clean and affordable energy, healthcare for all, world-class educational institutes, modern railway stations, airports, bus terminals, metro and railway transportation, logistics and warehousing, irrigation projects, etc.
Our Finance Minister had propelled the National Infrastructure Pipeline on December 31, 2019 of INR 103 lakh crore.
Income tax and its changes in the tax slab
In order to provide relief to the middle-class tax payers, new rates have been introduced. The new slab is simplified such that the income tax rates will reduce for individual tax payers.
Concession to real estate transactions
At present, while taxing income from capital gains, business benefits and other sources in regard of transactions in real estate, if the consideration value is less than the hover rate by more than 5 percent, the difference is included as income both in the hands of the buyer and seller. In order to minimize hardship in real estate transaction and provide help to the sector, our FM proposed to build the constraint of 5% to 10%.
Concessional tax rate for Co-operatives
Co-operative societies play a significant role in our economy in encouraging access to credit, acquisition of information sources and promoting of items to their individuals. These cooperatives are now taxed at a rate of 30% an additional charge and cess. Our FM has proposed to provide an alternative to cooperative societies to be taxed at 22% in addition to 10% extra charge and 4% cess with no exception or conclusions. Further, our FM likewise proposed to exclude these co-employable social orders from Alternative Minimum Tax (AMT) simply like organizations under the new assessment system are absolved from the Minimum Alternate Tax (MAT).
Other key announcements
1. Increase in eco-friendly or the green building market.
2. Setting up of 5 new smart cities under the PPP model.
3. The government formulated a Partial Credit Guarantee Scheme for the NBFCs. The eligibility for debt recovery is said to decrease from INR 500 crore to INR 100 crore or INR 1 crore to INR 50 lakh. This is limited for Non-Banking Financial Companies (NBFCs) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002.
The above mentioned points have given India’s property industry much better prospects for this 2020.