On June 15, the revised Direct Tax Code (DTC) was released which has got approval now. This new DTC will be implemented from 2011. The aim of this revision is to simplify the existing income tax laws. There are some changes proposed in the code for the real estate sector too which go as follows:
Taxation policy for Rental Income Originally, according to DTC, the gross rent was to be calculated at a presumptive rate of 6% of either the market value, or acquisition or the cost of construction, whichever is higher. But the revised DTC has proposed that actual rent received or receivable for the financial year should be the basis of calculation.
Home Loan Interest Policy:Originally, it had been proposed to do away with the tax deduction on the interest paid on home loans. But, as per the revised DTC, tax deduction on the interest paid on home loans up to Rs 1.5 lakhs for purchase or construction will continue. This revision is quite encouraging for the buyers to buy residential properties.
Also, the property which has not yet been let out will be kept out of tax calculations. Thus, there will be no deduction against tax or interest.
Tag Archives: taxation policy
DTC Revision Beneficial for Realty
On June 15, the revised draft for the Direct Tax Code was released. This code is a try by the Indian government to simplify the laws of income tax. The government is waiting for the Parliament to pass the code and plans to adopt it from April 1, 2011.
Below is the list of some must know changes proposed in the draft code with respect to realty sector.
Short-term capital gains: As per the proposals, tax will be imposed on any gain or loss made on the sale of an asset within a year.
Long-term capital gains: The proposed laws say that after an year of purchase, the taxation policy on any gain or loss made on the sale of an asset will be implemented as per the long-term capital gains tax policy.
As per the draft code, from April 1, 2011, April 1, 1981 will not be considered for calculating the discount rate; rather April 1, 2000 will be considered for the same.
Rental Income Taxation Policy: The draft code has proposed that the gross rent should be calculated on the actual rent receivable or received for the financial year.
Home loan Interest Rates: The draft DTC intends to keep on deducing tax on the interest paid on home loans up to Rs 1.5 lakh for construction or purchase of residential property.
Self Occupied House Property: Any self occupied house property (property not been let out) will be allowed for deduction on account of interest to the tune of Rs 1.5 lakh.
This revised draft code of the DTC has come up as a boom for the home buyers and home owners. The revision seems to be beneficial for all, be it is investors or developers.