Union Budget 2024: Here’s the real sector’s wish list for tax breaks and incentives

Union Budget: There are many expectations and speculations about the potential benefits that various sectors expect from the Finance Minister. Union Finance Minister Nirmala Sitharaman is scheduled to present the Budget for the fiscal year 2024-25 in the third week of July. The Budget is expected to include a breakdown of the government’s projected revenue and expenditure across sectors.

The Indian real estate industry is particularly interested in potential reforms, tax breaks and incentives that could spur economic growth and address persistent, long-standing issues.

Here is a list of things the real estate sector is expecting this time:

In the interim budget for 2024-25, Finance Minister Nirmala Sitharaman announced to strengthen the social housing sector in India by adding 2 crores houses under the flagship scheme PMAY-U (Pradhan Mantri Awas Yojana – Urban). CA (Dr) Suresh Surana revealed his expectations regarding tax incentives to boost the real estate market:

AND. Article 80C: It allows taxpayers to claim deduction up to a combined ceiling of Rs 1.50 lakh on various expenses like civil service tax paid, repayment of principal on loan taken for purchase/construction of residential property etc. Since this amount has not been increased for many years, the government can adjust it in line with inflation and further bring investments in REITs under the purview of 80C deduction.

ii. Article 24(b): This Act helps the taxpayer to claim interest on loans taken for two houses occupied by him/her. In case of such deduction, the total monetary limit is Rs 2 lakh for both the properties combined. It is expected that the provisions will be rationalized and the benefit of interest deduction up to Rs 2 lakh should be removed or increased to at least Rs 4 lakh.

iii. Capital Gains Taxation: The government may consider easing the capital gains tax on sale of REIT units. At present, REIT units held by an investor can be termed as long-term capital assets only if they are held for a period exceeding 36 months. Such holding period may be reduced to 12 months to bring it at par with listed shares. Further, the benefit of deduction under Section 80C may also be provided for the investment made in REITs to increase participation of retail investors.

4. New tax system: Individual taxpayers opting for the new tax regime cannot offset losses on residential property against any other source of income. Due to the stability of the real estate market, many people have decided to buy residential property, and most of those who have taken a housing loan incur interest costs on the newly acquired property. So, if the new tax regime also allows individuals to offset such interest losses against their salary income, they will be motivated to opt for the new regime.

part Tax benefit under Section 80-IBA: Section 80-IBA provides for deduction of profits generated from the business of developing and constructing affordable housing projects. It is expected that the period for project approval by the competent authority may be extended from March 31, 2021 to March 31, 2024. The extension of the period required to claim tax relief under Section 80-IBA to at least 7 years from the current 5 years, considering the prevailing conditions in the country, could encourage developers to invest more in affordable housing projects. This extension of the tax holiday period beyond the existing schedule could potentially boost investments in this crucial segment.

With. Mortgage tax deduction: The government could introduce interest subsidy schemes or tax deductions on mortgage interest rates for first-time home buyers, which could boost demand. These measures, if implemented thoughtfully, could help boost the growth and stability of India’s real estate sector by supporting both supply and demand, while also attracting more investment in housing and infrastructure development.