After aroller coaster year of the pandemic, lockdown, WFH, online classes and socialdistancing, the new year 2021 began with the hope of an effective vaccine whichwould make it possible for us to return to our somewhat old routine. Indiacelebrated its 72nd Republic Day in a subdued manner; however the first Budgetof the year was presented by Nirmala Sitharaman, Union Minister of India on 1stFebruary with quite fanfare on an iPad instead of the Bahi Khata in thehistoric budget briefcase, cementing the digital age for India. The focus ofthe Budget this time is on the privatisation of State run firms, banks & aninsurance company and asset creation to propel the nation out of the Covidslump which has greatly hampered growth in all aspects.
Let’s look at some of the highlights of the Budget 2021with respect to real estate:
- There were no major changes in the taxrates but for home buyers it is the perfect time to buy a house as home loanrates and property prices both are down and states such as Maharashtra andKarnataka have also slashed stamp duties. Home buyers also get attractive taxbreaks which would make the loans and interest rates easier on the pockets.
- The principal or loan amount is allowedas a deduction from your gross total income subject to overall cap underSec80-C with other eligible investments of Rs. 1.5 lacs.
- To reduce tax liability, interest payableon self occupied property is subject to maximum deduction of Rs. 2 lacs underincome from house property and can be set off against other incomes like salaryin the same year. But the construction or acquisition should have beencompleted within 5 yrs from the end of financial year in which loan was takenor else the deduction will be limited to Rs. 30000.
- Deduction of Rs. 1.5 lacs for interest onloans for affordable houses valued upto Rs. 45 lacs from taxable income undersection 80EEA has been extended for loans sanctioned from April 1, 2019 tillMarch 31, 2022. Only those who do not own any other residential property on thedate of sanction of loan can avail this benefit which is over and above the Rs.2 lacs deduction on interest on home loan under Section 24 of the IT Act. So ifa home buyer avails a loan of Rs 40 lacs for a Rs 45 lacs home, this schemewould actually cover the entire interest on that loan.
- The above mentioned benefit will alsobring down the effective interest rates to around 5.5% from the existing 7%which is beneficial for current and future home buyers.
- If an individual has rented out his/herproperty, the difference between net rent (after adjustment of municipal taxes)and the entire interest on housing loan is the loss from house property whichcan be set off upto Rs. 2 lacs against other incomes like salary and can becarried forward (if not set off) for 8 assessment years.
- Individuals or HUFs will get an exemptionon long term capital gains arising from transfer of a residential property soldon or before March 31, 2022 if the consideration is invested in equity sharesof eligible startups.
- An extension of one year has beenproposed on the 100% tax holiday for real estate developers of affordablenotified rental housing projects which have been approved on or before March31, 2022. This will help the Govt. in achieving “Housing for all” by 2022.
- Customs duty on steel and marble &travertine blocks has been reduced to 7.5% and 40% respectively due to theexemption in social welfare cess for the latter. This is a welcome move forreal estate developers and homeowners who would like to construct or renovatetheir abodes.
- Rs. 1.18 lac crores have been allocatedto the road transport and highway ministry for 2021-22 to build a record 11000km NHs. The roadmap includes 8 major projects including Delhi-Mumbai,Bengaluru-Chennai, Delhi-Dehradun, Kanpur-Lucknow and Delhi-Katra 4 and 6 laneexpressways which will have advanced traffic management systems with speedradars, variable sign boards and recovery vans with GPS. This is the advent ofsmart cities which are highly advanced and aesthetically pleasing.
- The Delhi-Meerut RRTS also got a majorboost as Rs. 4472 crore were allocated to NCRTC which is executing the project.Construction of the 82 km corridor is in full swing and work has alreadystarted between Sahidabad and Duhai and some parts of Delhi. This will createbetter connectivity among these cities and travelling for work or leisure wouldbe a breeze.