Home buyers can breathe easy, industry can ride DTC to revival
Home buyers can breathe easy, industry can ride DTC to revival
have reasons to cheer. The new direct taxes code (DTC) is expected to bolster the demand for homes for both residential and investment purposes as it has proposed to retain the existing tax exemption norms. Unlike the original discussion paper on DTC, the revised paper has proposed to continue with the existing system of deducting interest payment up to Rs 1.5 lakh against home loan from the total taxable income.
Besides the discussion paper has also proposed to go ahead with tax deduction calculated on the presumptive rent which is currently calculated at 6% of the total value of the property.
DTC, which is likely to be introduced next fiscal had originally proposed to withdraw these exemptions.
Had the government withdrawn the proposal, there would have been an adverse impact on the industry, said Anil Kumar, CEO & Deputy MD at Ansal API, "One of the main resons why end-users buy houses is to save tax," he said.
Most end-users, especially those in the middle income group, avail loans to buy houses on which they get a tax benefit. As per the existing norm, home buyers are allowed to deduct interest payment of up to Rs 1.5 lakh from total taxable income.
Since home loan is a long-term contract, any such change adversely impacts the decision of borrowers, said an official of a home finance company.
"The move is especially good for people falling in the middle income group as they often" said Allen Pereira, CMD at Bank of Maharashtra.
The government's move has come as relief to home buyers at a time when the sector started showing early the sector started showing early signs of recovery. Real estate was one of the biggest casualties of the global slowdown when buyers turned away from the market. The situation has now improved with buyers gradually returning to the market.
The government in 2009 had argued the taxpayers would not be affected if benefit on interest payment against home loan was withdrawn as tax slab was also proposed to be changed comprehensively and net of tax income would increase would increase significantly. However, the withdrawal attracted a lot of criticism following which the government decided to go ahead with the existing norms.
Courtesy by BS dtd: June 17, 2010
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