Tax Relief

Extra tax breaks for first-time patrons

The tax break for buyers and property developers who buy or sell up to 20% below the district rate has also been extended to March 2022.

By Abhinav Kaul, Livemint, New Delhi

PUBLISHED ON FEB 02, 2021 03:51 AM

Finance Minister Nirmala Sitharaman has extended the tax breaks for first-time buyers of affordable housing in the Union’s budget for the budget year 2021-22 in order to further advance the government’s “Housing for All” initiative. The tax break for buyers and property developers who buy or sell up to 20% below the district rate has also been extended to March 2022. The FM called it the Safe Harbor Line.

In the 2019 budget, the government had provided for an additional income tax deduction of up to £1.5 lakh for home loan to buy an affordable unit (see below) £45 lakh). This provision allows first-time buyers to deduct interest on home loans. Sitharaman on Monday extended eligibility for this tax deduction until March 31, 2022.

Last year this was extended by one year to March 2021.

“This is a good budget for the affordable housing sector. Extending the affordable housing tax vacation for another year will encourage more developers to invest in the sector, ”said Ramesh Nair, real estate thought leader and former CEO of JLL India.

According to experts, the steps should keep the demand for affordable housing going in 2021.

To create further incentives for homebuyers and property developers, the government has extended the deadline for raising the safe harbor limit for unit sales from 10% to 20%. In principle, a homebuyer does not have to pay any additional taxes if the actual transaction value is up to 20% below the circle rate. “If a buyer buys a property below the district price and the difference does not exceed 20%, this has no tax implications for him. It is good for the real estate market because even if some deals take place below the circle rates, there is no penalty for either the buyer or the seller, ”said Anuj Puri, Chairman of ANAROCK Property Consultants Pvt. Ltd. GmbH.

The relief is only available for properties with a value of up to £2 crore and those bought from a developer in the primary market.

The 2021 budget also suggested making a dividend payment to REITs and InvITs that are exempt from source tax (TDS). REITs and InvITs are vehicles that developers can use to monetize revenue-generating real estate and infrastructure investments.

According to the regulations, 90% of the income generated under REITs or InVITs must be paid back to investors in the form of dividends.

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