What Budget 2020 Brought for the Real Estate of India?

On February 1, 2020, the Finance Minister Nirmala Sitharaman presented the annual Budget 2020. This is the government’s second budget of the term. 

The Finance Minister, in her speech, said that “Fundamentals of the economy are strong and that has ensured macroeconomic stability. Inflation has been well contained. Banks saw a thorough cleaning up of accumulated loans of the past decade, and then they were recapitalized. Companies were provided with an exit through the IBC. Several steps on the formalization of the economy were taken up.”

However, there were certain provisions made for the real estate sector of the country. we list them all:

·         Affordable housing: The government has been trying to boost the affordable housing segment to achieve the dream of ‘Housing for all’ by 2022. To further work on this, the government announced last year that an additional deduction of Rs 1.5 lacs will be given for the interest paid on the loans taken to purchase the affordable house. The deduction was allowed on the loans taken on or before March 31 2020. To make sure more buyers could avail the benefit, the Finance Minister extended the date of loan sanctioning by one year. To increase the demand of the affordable housing, the Finance Minister announced that tax holiday will be provided on the profits earned by the developers of affordable housing project approved by March 31, 2020. The Finance Minister also extended the date of approval of affordable housing projects for availing the tax holiday by one year. 

·         Concession on real estate transactions: To calculate the tax for the capital tax gains, business profiles and other sources in respect to the transactions in real estate, if the consideration rate is less than the circle rate by more than 5 percent then the difference is counted as income for both the buyer and the seller. To ease the calculation of the transactions and provide relief to the sector, the finance minister proposed the limit to be increased from 5 percent to 10 percent. 

·         Infrastructure: The Finance Minister proposed an allocation of Rs 100 lac crore to be invested in the next five years for the development of the real estate and infrastructure of the country. 

·         The concessional tax rate for cooperatives: Cooperative societies play an important role in boosting the economy of the country by facilitating the access to credit, procurement of the input and marketing of the products to their members. Currently, the cooperatives are charged with 30 percent surcharge and cess. To bring more parity among the cooperatives and corporates, the FM proposed that the cooperative societies will be taxed at 22 percent + 10 percent surcharge + 4 percent cess with no further deduction. The FM also proposed that the cooperatives societies should be exempted from Alternative Minimum Tax (AMT) just like the companies under the new tax regime are exempted from the Minimum Alternate Tax regime. 

·         NBFCs: The FM proposed that the NBFCs should be eligible for the debt recovery under SARFAESI Act 2002, to be reduced to Rs 100 crore from Rs 500 crore.

·         Personal Tax: New tax regime was introduced in this year’s Budget:

·         10 percent for the income between Rs 5 lac to Rs 7.5 lac as against the current rate of 20 percent. 

·         15 percent tax for the income between Rs 7.5 lacs to Rs 10 lacs as compared to the current 20 percent. 

·         20 percent tax for the income between Rs 10 lacs to Rs 12.5 lacs as compared to 30 percent. 

·         25 percent tax for the income between Rs 12.5 lacs to Rs 15 lacs as compared to 30 percent. 

·         The annual income of up to Rs 5 lacs is non- taxable.