Income Tax Relief for developers and homebuyers | Fusion - WeRIndia

Income Tax Relief for developers and homebuyers

Income Tax Relief for developers and homebuyers

Good news to homebuyers and developers as the government announced income tax relief. The finance minister Nirmala Sitharaman announced income tax relief for developers and homebuyers under the economic stimulus package, Atmanirbhar Bharat 3.0.

To uplift the real estate sector in the country, the government announced the relief. As per the announcement, new homebuyers or primary purchasers will get income tax relief up to 20 per cent on houses priced below ₹2 crores. The benefit will be available on differential value for them up to June 30, 2021.

Now, the acceptable differential value between the circle rate and agreement value to calculate income tax is 20 per cent which was 10 per cent in the past.

As a result, buyers will get an additional notional benefit or discount of 10 per cent. At the same time, the developers also get an additional income tax relief on the deemed tax.

Circle rate is the minimum rate for square feet of building or land fixed by the government. It varies in different circles and areas. However, in some areas of circles, the actual value of a sale is lower than the circle price. In such cases, the difference value is treated as income from other sources after the permissible limit.

The buyers will have to pay income tax if it is exceeded the limit. Similarly, the sellers also have to pay income tax to the government, adding the differential amount to their profit. So far, it is 10 per cent. Now, the limit has been extended to 20 per cent.  Both the buyers and sellers will benefit from it.

Bank guarantees given by the contractors have also been slashed.

Developers or builders have to provide bank guarantees for their project construction. It ranges from 10 to 15 per cent of the overall project cost. However, as per the new announcement, the bank guarantee will be reduced to 3 per cent of the total project cost.

The cut in bank guarantee helps builders and developers get access to additional liquidity.

Photo by Nazish Mirekar on Unsplash (Free for commercial use)

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