The Union Budget 2016 was unveiled by Finance Minister Arun Jaitley on Feb 29, 2016. The minister announced nine pillars of his budget- Agriculture, Education, Financial Sector Reforms, Ease of Doing Business, Tax Reforms, Skills and Job Creation, Development of Social Sector including healthcare, Rural Sector and Infrastructure. This budget majorly focuses the poor and the urban populace of the country. To make urban living easier for the lower middle class, the budget has brought several reforms to boost affordable housing in India.
Here are a few important points of budget 2016 for the real estate sector:
No Dividend Distribution Tax (DDT) on REITs
The Real Estate Investment Trusts (REITs) have been a hot topic in Union Budget since 2014. It only got approval after much debate in 2015. The main impediment in the way of REITs was the imposition of DDT because of which developers were averse about raising funds for their projects through REITs. But now that the DDT on REIT has been done away with, builders can find more affordable ways of financing their projects. Investors will also be confident about putting their money in the real estate sector.
Aid for the First Time Homebuyers
To encourage people to buy their own home instead of living on rent for a lifetime, the government has allowed an additional deduction of Rs 50,000 on the interest paid on a loan of up to 35 lakh. The total value of home for this scheme should be up to 50 lakh.
Increased Exempted Value on House Rent Allowance (HRA)
Mr Jaitley said that Section 80GG said that the HRA exemption amount was 24,000 which was not realistic keeping in view the rates prevalent in the market. However, now this exempted value has been increased to 60,000. This will help the assessees who do not own a house and yet do not get HRA as a part of their salary.
Boost to Affordable Housing
Affordable housing was one of the top agendas discussed in Union Budget 2016. Finance Minister proposed that the homes with an area of less than 60 sq mt will be exempt from service tax. Moreover, the tax on profit earned will also be exempt for houses less than 30 sq mt in size in metro cities and less than 60 sq mt in non-metro cities. All this will encourage builders to lower the cost of housing projects and bring them within the reach of mid-segment buyers.
Some other points that would benefit the common man include:
Increased Employee Provident Fund (EPF)
Service Tax Rates Unchanged
Hike in Tobacco Rates
Tax Imposed on Dividends
No change in Income tax Slabs
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