Finance Minister Nirmala Sitharaman has announced income tax relief for developers and home-buyers in order to boost the demand for residential real estate in the country, as part of Atmanirbhar 3.0 stimulus measures to push economic growth. The first-time buyers of houses costing up to Rs 2 crore will get income tax relief of up to 20 per cent and this will be available till June 30, 2021. "This will incentivize people to buy homes and bring down the excess inventory," Nirmala Sitharaman said.
The Finance Minister announced doubling the differential between circle rate (stamp duty value) and agreement value (purchase value) for primary sale of residential units of up to Rs 2 crore, from 10 per cent to 20 per cent. "The government has decided to increase the differential from 10 per cent to 20 per cent under Section 43(CA) of the IT Act till June 30, 2021," the finance minister said, adding that necessary amendment to the income tax act will be made in due course. As a result, buyers of these units will get tax relief of up to 20 per cent under Section 56(2)(x) of IT Act, she added.
The tax relief will help the middle class which wants to buy when the housing sector is sitting on inventories, the finance minister emphasized.
Bank guarantees for construction activity, which constituted 10-15 per cent of the total project cost, will now be reduced to merely 3 per cent of the overall project value. This will ensure availability of additional liquidity to companies and reduce the burden on contractors.