Financial Express: Centre accords core status for housing

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Centre accords core status for housing

Our Bureau

New Delhi, Aug 25: The centre on Tuesday accorded infrastructure status to the housing industry, paving the way for more foreign direct investment in the sector.

The house-building industry will now be able to get fiscal concessions under Section 80-1(A) of the Income Tax Act.

Under the new guidelines, fiscal incentives like tax holiday for investment in the housing sector, automatic approval to foreign direct investment, special concessions under the Income Tax Act, exemption from assessment under the Wealth Tax Act, relief from capital gains and reduction in stamp duty will be granted to the house building industry.

Urban development secretary Kiran Aggarwal said that "conferring the elite status to housing industry will enable housing finance companies to raise long-term resources that are required for lending at considerably low cost. This in turn will soften the interest rates on housing loans".

"Similarly, companies with sound financial track record will be allowed to raise external commercial borrowings for housing and real estate development," Aggarwal said adding that the cost of funds raised by the housing finance companies is 13 per cent whereas they lend to EWS & LIG housing schemes at nine per cent."

For raising resources for the housing for the weaker sections of the society, the housing finance companies will be entitled to get concessions under section 10(23G) enabling them to raise resources at low cost for funding affordable housing for the poor, he said.

Experts feel the exercise is expected to target housing finance companies, NRIs, people of Indian origin (PIOs) and foreign companies to invest higher amounts in private housing projects that offer lucrative returns provided they reinvest a part of their profits in low-cost housing.

The government may also allow the multinationals and housing finance companies to continue transferring 40 per cent of their profits to a special reserve which enjoy tax exemption, they maintain.

Approved housing projects would now be granted 100 per cent deduction from profits for the first five years and 30 per cent deduction for the subsequent five years and the companies promoting World Bank aided housing projects would be given 50 per cent deduction in their profits.

Besides this, deductions from taxable income like rental incomes have been increased from 20 per cent to 25 per cent under section 24 of the IT Act. Part of the interest repayment on loan taken for house building is deductible under the income tax act in case of self occupied houses.

Under Section 71 of the IT Act, losses from house property have been permitted to be set off against other incomes for the same assessment year and the balance loss will be permitted to be carried forward for a maximum period of next eight years by including section 71 H of the IT Act. The deductible amount has been increased from Rs 15,000 to Rs 30,000 per annum.

From now on, the land held as stock in trade has been exempted from assessment under wealth tax for a period of seven years instead of five years. Section 80 GG of the Income Tax Act, in respect of reduction for rents paid out has been reintroduced, this would permit deduction up Rs 24000 per year from taxable income.

Fresh guidelines also provides for deduction up to 50 per cent of the profits would be permitted to companies engaged in housing projects aided by the world bank.

For some specified properties like commercial complexes, exemption from wealth tax has been granted. Similar facility has been extended to rented with a condition that the property was being rented out for at least 300 days in a year.

INSIGHT

Focus on urban housing

Infrastructure status should have meant tax-free facility for bonds floated by housing-construction companies. This would have reduced the cost of finance. Instead, the policy focuses on tax holiday for five years to accelerate sales. The doubling of deductible interest on housing loans from income will help owned housing. The policy thrust is on urban housing for the better-off.

Net Express

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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.

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