Industry body FICCI has suggested the government to increase the deduction in taxable income available under Section 24 of the Income Tax Act to Rs. 3 lakh on interest against home loan to boost the housing sector. The suggestions for the real estate sector come ahead of the announcement of the full-year budget on July 5. In its pre-Budget memorandum, FICCI mentioned a number of measures – such as rationalisation of provisions for immovable property transactions and inclusion of the realty sector within the purview of Section 72A of the I-T Act – in its list of suggestions to the government for the upcoming event.
Deduction of interest paid on borrowed capital
Currently, Section 24 allows deduction up to Rs. 2 lakh against payment of interest on home loans taken for acquisition or construction of self-occupied house property. It is recommended the exemption should be increased to at least Rs. 3 lakh per annum, according to FICCI.
Rationalisation of provisions with regard to immovable property transactions
FICCI has recommended that a different rate of variation may be provided for metro and non-metro cities (say 10 per cent or higher for metro cities and 5 per cent for non-metro cities) for taxing the capital gains arising out of immovable property transactions.
“The real estate sector has been facing a slack in the recent past due to which the property prices have reduced. Further, there is no corresponding reduction of prices as per the circle rates/ready reckoner rates for the purposes of calculation stamp duty,” noted FICCI.
“A variation of 5 per cent would majorly be due to the market scenario of the industry rather than escape from taxability.” A variation of flat 5 per cent may not be appropriate for all locations in the country, and it may be considered to increase the variation to at least 10 per cent for all, or 10 per cent/higher in case of metro cities and 5 per cent/higher in case or non-metro cities, it added.
Here are some other measures recommended by industry body FICCI in its pre-Budget (2019-20) memorandum:
- Removal of restriction on set-off of loss from house property
- Inclusion of realty sector within purview of Section 72A: This will enable the consolidation and consequential efficiency for the sector, according to FICCI.
- Deduction under Section 80-IBA: To fulfil the government’s aim of “Housing for All by 2022”, it is suggested that the timeline for approval under section 80IBA of the Act be extended to March 31, 2020, according to FICCI.
- TDS on payment on transfer of immovable property – Section 194-IA: It is recommended that the requirement of TDS (tax deducted at source) by the buyer on transfer of property be removed or the limit for applicability of TDS be increased from Rs. 50 lakh to Rs. 1 crore, according to the FICCI document.
- Period of holding of ReITs (real estate investment trusts) to be made in line with listed shares: It is recommended that the suitable amendment should be made in Section 2(42A) of the Act to reduce the period of holding to 12 months (as applicable for listed shares) even in case of units of ReITs listed on recognised stock exchange, according to FICCI.