On 12th November, as part of Atmanirbhar 3.0 stimulus geared towards economic growth, Finance Minister Nirmala Sitharaman has announced additional income tax relief for home buyers and real estate developers. This is expected to encourage individuals with the monetary capacity to invest in real estate and for developers to clear existing inventory and obtain liquidity for future projects.
As per the government ruling under Section 43(CA) of the IT Act, for primary sale of residential units costing up to Rs.2 crores, home buyers will now get an income tax relief of up to 20% till June 30th, 2021. “This will incentivize people to buy homes and bring down the excess inventory,” stated Nirmala Sitharaman. Buyers of such units will get a tax benefit of up to 20% under Section 56(2)(x) of IT Act, 1961.
The differential between circle rate (stamp duty value) and agreement value (purchase value) for a residential unit costing up to Rs.2 crores has now been doubled to 20% from 10%. This is the second time this differential value has been revised this year; the first announcement came in February when this differential was increased to 10% from 5%.
In an instance where the circle rate is Rs.1.5 crores, the cost of the house can go up to Rs.1.8 crores to keep within the 20% differential. With the earlier 10% differential rule, this would’ve limited your purchase budget to Rs.1.6 crores. Also, as a boon to realtors, bank guarantees that earlier cost 10-15% of the project value will now stand at just 3% of the total project cost.