Real estate players welcomed the tax benefits and exemptions announced in the Interim Budget which are likely to boost the realty demand, more so in the affordable segment.
Presenting the Interim Budget, Finance Minister Piyush Goyal proposed a slew of measures to boost the real estate sector which includes extending the exemption period for levy of tax on notional rent on unsold inventories to two years.
Owners of unsold inventory are currently exempt from paying income tax on notional rent for a period of one year.
"The Minister has proposed extending the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years. This will be applicable from the end of the year in which the project is completed, and this will ensure that the slowdown in creation of fresh stock as a result of the previous situation will be positively impacted," said Niranjan Hiranandani, President of the National Real Estate Development Council (NAREDCO).
Anoop Kumar Mittal, CMD, NBCC, said: "The government's endeavour to significantly reduce the tax burden on home buyers is highly commendable."
On the proposal to extend the benefits under Section 80-IBA of the Income Tax Act for one more year, Hiranandani said the decision would be a boost for the affordable housing segment. All the housing projects registered under the Real Estate Regulatory Act by March 31 next year would come under its ambit.
"The move would bring a much-needed breather for some projects which have struggled to complete for various reasons," said R.K. Arora, Chairman, Supertech.
Also, the benefit of rollover of capital gains under Section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a taxpayer having capital gains up to Rs 2 crore.
According to Dhruv Agarwala, Group CEO, Housing.com, the increase in benefit of rollover of capital tax gains to two residential houses, for a taxpayer having capital gains up to Rs 2 crore will promote buying of second house by buyers.
Further, the proposal for exempting Tax Deduction at Source (TDS) on rented properties up to Rs 2,40,000 per annum is also a favourable move for the common man, according to Ashok Mohanani, Chairman, Ekta World.
Market participants were also emphatic about the proposed tax exemption for individuals with annual incomes of up to Rs 5 lakh. The current tax exemption limit is Rs 2.5 lakh.
"The budget has taken a good step in increasing disposable income of middle class by making changes like increasing the basic exemption limit to Rs 5 lakh, increase in standard deduction and increase in deduction for interest income," said Dhaval Shah, Joint Managing Director, Parinee Group.