By Dr. SURESH SURARA
Founder, RSM India*
A host of measures have been proposed in the Finance Bill 2021, which is targeted to provide relief to both the affordable house buyers as well as the developers of affordable housing projects. These specific and targeted measures would help boost the activity in the real estate sector.
The proposal to increase the tolerance limit from 110% to 120% was initially brought in as part of AatmaNirbhar Bharat Package 3.0 on 12 November 2020 for residential units meeting the specified conditions and the legislative amendments were to be brought in due course. This is a consequential amendment made under the provisions of section 43CA & 56(2)(x) to give effect to the said announcement by the Ministry of Finance.
As per the provision, in case of sale of any land or building or both as stock-in-trade (other than capital asset) by an assessee, the transaction is governed by Section 43CA of the Income Tax Act, 1961 (hereinafter referred to as ‘the IT Act’). The said section creates a deeming fiction whereby, the circle rate or the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty would be deemed to be the full value of consideration for the purpose of computation of business income wherein the circle rate or stamp duty value exceeded 110% of the consideration received or accrued as a result of the transfer of the property as per the sale agreement.
It is notable that this revision from 110% to 120% is applicable only with respect to sale of residential units costing upto Rs. 2 crores from 12 November 2020 till 30 June 2021. Therefore a flexibility has been brought in, which would be helpful to both the seller and buyer in better negotiating the price, in cases where the property cost could be lower than the circle rate or stamp duty value and without attracting any income-tax.
Moreover, a consequential relief of upto 20% would also be provided to the buyers of such property u/s 56(2)(x) of the IT Act which previously used to treat the difference between the circle rate or market value and the consideration as referred in Section 43CA to be treated as income taxable in the hands of the buyer under the head ‘Income from Other Sources’.
Section 80EEA of the IT Act, provides for an additional deduction of up to Rs. 150,000 in respect of interest on housing loan sanctioned by a bank or housing finance company during the period 1st April 2019 to 31st March 2021. There are further conditions that the stamp duty value of residential house property does not exceed Rs. 45 lakh and the assessee does not own any residential house property on the date of sanction of loan.
In order to help such first-time home buyers, the provision of section 80EEA is proposed to extend the date for sanction of loan from 31st March 2021 to 31st March 2022. This is a welcome measure and would help in ensuring ‘housing for all’ and also boost the demand for affordable housing.
- Section 80IBA which provides exemption to developers of affordable housing projects the period of approval extended from 31 March 2021 to 31 March 2022
In continuation of the measures to boost affordable housing the period for obtaining the project approval has been extended by 1 year upto 31 March 2022. The other conditions for project eligibility such as construction to be completed within 5 years from the date of approval shall still continue.
- Section 80IBA which provides exemption to developers of affordable housing projects has been extended to notified rental housing projects
As a measure to improve the standard of living and to make affordable rental housing available to the migrant labours, it is proposed to provide for 100% deductions of the profits and gains derived from the business of developing and building affordable rental housing project. One of the conditions is that the rental housing project should be approved by 31 March 2022. The eligible rental housing projects would be notified by the central government in the official gazette.
(*6th largest accounting, tax and consulting group in India)