CREDAI welcomes introduction of Goods and Services Tax (GST) as a major reform since it integrates all central and state taxes into one comprehensive tax regime for the entire country, the body said in a statement.
The trade and industry are major gainers of GST as it eliminates multiple taxation at the state and the Centre levels and the consequent cascading effects, it said.
However, where as for all other sectors GST is their total indirect tax liability, for real estate the GST rate is fixed at 12 per cent which was only a fraction of its tax burden, CREDAI said.
It said that the real estate sector is exceptional because GST regime does not eliminate multiple taxation. “Stamp duty levied by the states on all immovable property would continue to remain in force even after implementation of GST.
The additional burden on real estate on account of stamp duty averages between 5 per cent to 8 cent of the value of the immovable property.
Secondly, the duty is payable on every transaction and is levied by the state governments on circle rates or guideline values of property which are arbitrarily determined and far in excess of the value at which transactions takes place, it said.
Unless abatement for land is allowed, cost to the end consumer would go up.
CREDAI would, therefore, urge the government to minimize double taxation of real estate by treating land as zero rated under the GST regime. The positive multiplier effect of real estate on other industries would make up the revenue loss and the nation would be thankful for a tax regime consistent with the objective of Housing for All by 2022, said Mr Nandu Belani, President, CREDAI Bengal.
With the announcement of the rates for taxation under the Goods and Services Tax (GST) for various goods, India is now one step closer to becoming a unified tax market. However, while the impact of GST on various sectors and goods is now known, industry experts are still divided over how GST will impact real estate going ahead as clarity on the tax slabs for services is still awaited.
According to industry experts, prima facie it looks like that there will be a neutral impact from cost perspective. Although the work contracts will attract around 12% and most of the construction material is under the 18% and 28% slab, the availability of input tax credit should neutralize the overall impact. A lot, therefore, will depend on the proper implementation and a proper system of claiming tax credits.
With the Real Estate Development and Regulation Act (RERA) also under implementation, developers may need to focus much more on streamlining their processes. We may expect initial teething issues, but implementation of GST should further enhance India’s attraction as an investment destination by encouraging greater transparency and ease of operation in all property deals, says Surabhi Arora, Senior Associate Director, Research, Colliers International India.
However, it is too early to say whether the implementation of GST will actually cool down the prices in the commercial and residential segments. “More clarity will come in the coming days as it is still not clear what would be the abatement available for land cost for calculating service tax on under-construction projects,” she says.
Anshuman Magazine, Chairman, India and South East Asia, CBRE, also says that several goods connected to the real estate industry are falling under the 18% and 28% slab. However, clarity on the tax slabs for services is still awaited. “In the long term, however, the successful implementation of GST in the country will be a game-changer for the market. The removal of various federal tax barriers and creation of a common market will improve supply chain efficiency and attract more FDI into the country,” he says.
Apart from attracting more FDI into the country, GST will also impart more transparency to the sector which currently faces a perception issue. “It will provide a thread for audit and checks for better control and monitoring of the sector. As a result, the home buyer will be empowered towards informed decision-making,” informs Amit Agarwal, co-founder, NoBroker.
GST will free end-consumers from the hassle of paying several state taxes at different levels, therefore removing the double taxation impact. Also, the implementation of GST will hugely benefit the NRI community towards investment in real estate through the formation of a seamless all-inclusive channel. The existing channels include issues of multiple taxation, amounting to indirect taxes and no uniformity.
In totality, “GST will add up as another factor among the government’s other schemes towards affordable housing, which is beneficial to the growth of the sector. Buying a home will now be easier as benefits will now be extended to both the developers and the end-consumers, says Agarwal.
Planning to buy a property in Kolkata. The good news is that property prices are comparatively lower than in the rest of the metro cities of India. The ‘city of joy’ is a good ground for making a purchase without making much dent in the markets. Magicbricks brings some key pointers which will help you in making a correct investment decision.
The year started with a marginal rise (0.56%) in property prices. The top localities registering highest average price per sq ft are Ballygunje Circular Road (Rs 14,752); followed by Keyatala Road (Rs 10,263) and Ultadanga (Rs 7,829)
The year 2016 ended with a marginal 0.2 per cent increment. In the previous quarter (Jul-Sep 2016) the recorded gain was 0.57 per cent
East Kolkata should be surveyed as many upcoming projects are present here. Properties in this region start at Rs 2,000 per sq ft and reach Rs 6,000 per sq ft. The region accounts for almost half the city’s residential supply and grew by 0.5% over the previous quarter
North Kolkata caters to the budget segments with prices between Rs 2,000-4,000 per sq ft. Average prices here declined by a significant 3.4 per cent this quarter. Choose this region only if you have a long horizon
West Kolkata is the least significant residential destination of the city. This region provides properties in the range of Rs 3,000-4,000 per sq ft. It climbed by a significant 3.9% over the last quarter. Don’t miss this portion of the city!
South Kolkata, starting from the south of AC Bose Road, provides the widest range of options. Properties here start at Rs 2,000 per sq ft and go upto Rs 8,000 per sq ft. This region grew by just 0.1 per cent in the quarter. It provides the costliest properties of all regions in Kolkata, where properties costlier than Rs 6,000 per sq ft are almost exclusively found here
If you are facing trouble choosing between ready possession and Under Construction (UC) properties, then you should know that the former were 3.8 per cent more expensive than UC properties. The average percentage price difference in the UC versus Ready-to-Move-in (RM) properties remained more or less stagnant over the last quarter..
The government has cut down tax benefits borrowers enjoyed on properties let out on rent. “In order to address the existing anomaly of interest deduction in respect of let out property vis-a-vis self-occupied property, it is proposed to restrict set off of loss from house property against income under any other head during the current year up to Rs. 2 lakh. The loss not so set off would be allowed to be carried forward for set off against house property income for eight assessment years,” Finance Minister Arun Jaitley said in his Budget 2017-18 speech.
As per current tax laws, for properties rented out, a borrower could deduct the entire interest paid on home loan after adjusting for the rental income. On the other hand, borrowers of self-occupied properties get Rs. 2 lakh deduction on interest repayment on home loan.
However, according to the proposed change, on rented properties, the borrower can only claim deduction of up to Rs. 2 lakh per year after adjusting for the rental income. And the amount above Rs. 2 lakh can be carried forward for eight assessment years. Since the interest component of home loan repaid in initial years is higher, experts say that the borrower may not be able to fully adjust the interest paid as deduction even in subsequent years.
For example, your interest outgo on a second property is Rs. 5 lakh in a particular year. Assume that you are earning a rent of Rs. 1.5 lakh annually from the property. Such buyers, according to the earlier rule, were allowed to adjust the difference of Rs. 3.5 lakh (Rs. 5 lakh interest minus Rs. 1.5 lakh). But from the next financial year, they will be allowed deduction of just Rs. 2 lakh. The remaining amount of Rs. 1.5 lakh (Rs. 3.5 lakh minus Rs. 2 lakh) can be carried forward up to eight financial years and be adjusted later.
Experts say the move will dampen the demand for buying a second property for the purpose of earning rental income. “High net worth individuals used to buy properties on loan and were able to set off the full interest liability against the lettable value of property usually resulting in loss which would substantially bring down tax liability and consequently their borrowing costs. This avenue is now closed and loss above 2 lakh would have to be mandatorily carried forward,” said Sandeep Sehgal, director of tax and regulatory at Ashok Maheshwary & Associates LLP.
The finance minister in Union Budget 2017-18, however, proposed a change that will attract lower tax on gains from property sale. Mr Jaitley proposed that the holding period of a property for qualifying under long-term gains will get reduced to two years, from three years currently.
As per current tax norms, if a property is sold within three years of buying, the profit from the transaction is treated as short-term capital gain and is taxed according to the slab rate applicable to him/her.
Affordable houses may soon be exempt from stamp duty, which varies between 4% and 8% of the transaction value.
Union minister for urban development and housing minister Venkaiah Naidu said that his ministry has written to state governments to exempt affordable houses from stamp duty. Stamp duty is a state subject, with the state government fixing the rate and collecting the duty.
New Delhi, Feb 21: Union Minister M. Venkaiah Naidu on Tuesday urged real estate developers to take up affordable housing projects in a big way while stressing that the future of the real estate sector lay there.
The government’s focus on ensuring Housing for All including the Middle Income Groups offers immense opportunities both at the bottom and the middle of the pyramid which needs to be seized by the developers who have seen ups and downs in recent year, the Union Minister of Housing and Urban Poverty Alleviation said.
He was speaking at a conference on Real Estate Sector-Post Remonetisation and RERA organised by PHD Chambers.
Naidu said the government has paid more attention to the real estate sector than any other sector by announcing more than 20 supporting measures to revive it.
Low-cost long-term financing under infrastructure status, tax concessions and central assistance under Pradhan Mantri Awas Yojana and the scale of housing needs of these sections make affordable housing the best investment opportunity and developers are left with no further excuses for not seizing this opportunity, Naidu said.
He said that various initiatives of the government including the Real Estate (Regulation and Development) Act, 2016, the Benami Properties Act and note withdrawal have enabled a new real estate eco-system based on 4 ‘Cs’ viz., Character, Credibility, Confidence and Cash that would help revive the sector.
He said that while the Real Estate Act removes the taint restoring the character of the sector leading to credibility and enhanced confidence of buyers, central assistance, reduced interest rates and tax concessions keep more cash in the hands of buyers.
Stating that his ministry has so far approved construction of over 16 lakh affordable houses for urban poor with an investment of about Rs 90,000 crore and central assistance of about Rs 25,000 crore, Naidu expressed concern over private developers not taking up any projects so far.
He urged them to change their mindsets and outlook and take up affordable housing projects given the business logic that goes with it in the changing context.
Naidu said that his ministry would soon convene a Round Table with real estate bodies and representatives of banks and Housing Financing Companies and others concerned to deliberate on the road ahead for promoting affordable housing so that the target of ensuring Housing for All by 2022 would be met.
KOLKATA: After Arun Jaitley wooed middle class home buyers with a bonanza in the Union Budget, it is time for Amit Mitra to dangle the carrot. The state government on Friday offered incentives to encourage timely registration of properties instead of delays that run into years and hold up stamp duty and registration collection that amounts to nearly Rs 4,000 crore a year.
Presenting the state budget, finance minister Amit Mitra offered a 20% rebate on registration fee if buyers do so within a year of the project completion. With registration fee at 1% of the property value, the buyer of a property valued at Rs 50 lakh can save 0.2% or Rs 10,000.
Mitra also eased the payment condition for registering the sale agreement. At present, very few buyers get the agreement registered as they had to then pay 7% stamp duty even when construction hadn’t begun yet. Mitra has now proposed registration of the agreement against 2% stamp duty and offered buyers four years to pay the balance 5%. During the four year period, the valuation of property will remain unchanged. If, however, the balance is paid after four years, the 5% will be according to the new valuation. All projects launched after January 1, 2015, can avail of this benefit.
On a flat of Rs 50 lakh, a buyer has to now pay Rs 1 lakh instead of Rs 3.5 lakh at the time of registering the sale agreement. On the Rs 2.5 lakh, a home buyer can earn Rs 17,500 a year through interest in bank deposit or Rs 70,000 before making the payment at the end of the fourth year. Thus a buyer of a Rs 50 lakh property can save up to Rs 80,000, including the saving of Rs 10,000 as rebate on registration fee.
The second proposal is expected to facilitate greater compliance with the Real Estate (Regulation and Development) Act, 2016, that requires registration of the sale agreement to make the document legally tenable.
Zeroed in on the apartment or villa you want to buy? A home loan comes right after. And even if you have enough savings stashed in to perhaps buy a home outright, you really shouldn’t. A home loan today comes at 9.5% rate of interest. Inflation measured through consumer price index is at around 6%. Now add all the tax benefits which this copy is all about and what you really pay as real interest to the home loan company is about 1-2%. So take your savings, put them in a good mutual fund, and make a beeline for a home loan.
Here are the 4 tax benefits that make the math of taking a home loan so compelling
1) Section 24 of Income Tax Act: Homeowners can claim deduction of up to Rs.2 lakhs on the interest they pay annually on their home loan. There are 3 conditions which need to be met
a) The loan must have been taken either for purchase or construction of a new property.
b) The loan must have been taken on or after 1 April, 1999, and
c) The purchase or construction must be completed within 3 years from the end of the financial year in which the loan was taken.
What happens if the property is not ready in 3 years, which is more common than rare in India! In this scenario, the aggregated interest will be allowed deduction in five successive financial years, starting from the year in which the acquisition/construction was completed.
This benefit is available to everyone, whether you live in the house or don’t. But if the property is rented out, there’s an additional benefit. Your entire interest on the home loan becomes deductible giving you a huge tax edge.
2) Then come section 80C of the Income Tax Act: You can deduct the principal amount if the apartment or house if self-occupied. Total deduction with a ceiling of Rs 1.5 lakh is allowed for such payments under the overall limit available under Section 8OC. Stamp duty, registration charges and other expenses related directly to the transfer are also deductible under this section, subject to a maximum deduction amount of Rs.1,50,000. You should claim these expenses in the same year you buy property in.
The law does make an exemption and allows deduction in case your city of employment is different from where you have bought the property in,
3) Also know about the Section 80EEE of Income Tax Act: This deduction has been recently added and is available only for first time homebuyers provided
a) The cost of property does not exceed Rs 50 lakh while maximum home loan is Rs 35 lakhs
b) Home loan must be sanctioned between April’16 to March’17
c) No other property should be owned by the tax payer on the date loan is sanctioned
This deduction is made be available from Financial Year 2016-17 onwards.
Both resident and NRIs are eligible to claim this benefit.
4) And the best part: If you buy the property along with your partner, spouse, or parent, joint owners who are also co-borrowers can claim the above benefits separately. Hence, double the benefit. But the important point to note is that you may have jointly taken the loan but if you are not a co-owner in the property, then you cannot claim these tax benefits.
Source : news.housebolo.com