Who will benefit from government’s relaxations in housing tax? Find out

Finance Minister Nirmala Sitharaman on Thursday announced several measures to provide relief to different sectors in the COVID-19 hit economy. One of the most significant announcement came in the form of relaxations in income tax rules to allow sale of primary residential units of up to Rs 2 crore value below the circle rate. Till now, only 10 per cent difference between the circle rate and the agreement value was allowed. 

To boost residential real estate sector, she said the differential has now been increased to 20 per cent for period up to June 30, 2021 for only primary sale of residential units of value up to Rs 2 crore. 

"This measure will reduce hardships faced by both home-buyers and developers and help in clearing the unsold inventory," she said. 

“The increase of price differential from 10% to 20% compared to circle rates for first time sale of houses up to Rs 2 cr should give good relief to home buyers, not attracting section 56(2)(x) for the buyer and not attracting deemed income due to price differential for these home sellers. The benefit is only upto 30 June 2021. The intention is to help sell the existing inventory and increase demand for housing priced upto Rs 2 cr.” Daksha Baxi, Head – International Taxation, Cyril Amarchand Mangaldas explained. 

Finance minister also announced a Rs 18,000-crore additional outlay for the urban housing scheme to help complete real estate projects. This will be over and above Rs 8,000 crore already provided this year. The move will help start work on 12 lakh houses as well as complete 18 lakh houses. 

Ashoo Gupta, Partner, Shardul Amarchand Mangaldas and Co said that these announcements clearly emphasis government's committed focus towards making affordable housing development a widespread reality in India over the next 5 years to 7 years.