The time of the year has come when everyone is dreaming about the Finance Minister’s briefcase. Though real estate is ready with its list of expectations, experts believe that this year it would be good to expect much from the government owing to the kind of fiscal deficit government is going through. Expectations are high because of the increase in home loan interest rates, which have hampered the affordability of the buyer.
Real estate developers are expecting that the budget would provide sufficient stimulus and sops to achieve the desired growth rate. Apart from slew of demands that take place year after year, developer would like the government to promote three things — townships, affordable housing and green building – though various measures. Some of the measures that would help the sector are:
Extension of Section 80 IB(10):
Extension of the date of approval of the housing project for further 3 years (from March 2008 – March 2011) in existing section 80 IB (10) and introduction of the same section in the Direct Tax Code to be implemented in future with more clarity relating to part of the housing project complying the conditions on standalone basis should be treated as eligible project. As India is still facing a shortage of residential units, and the provisions of section 80 IB (10) has positively contributed towards requirements of housing.
Tax benefits to large townships similar to Section 80-IA:
Section 80-IA of the Income Tax Act provides that where the gross total Income of an asessee includes any profits and gains derived by an undertaking or an enterprise from any of the business of either (i) developing or (ii) maintaining and operating or (iii) developing, maintaining and operating any infrastructure facility then a deduction equal to 100% of the profits and gains derived from such business shall be allowed for ten consecutive assessment years. Similar tax benefits should also be given to Developers who are engaged in undertaking large scale urban development projects such as townships of more than 1000 acres.
Weighted Deduction for Expenditure in respect of EWS:
Weighted deduction should be allowed on the expenditure made in respect of housing units or housing sites reserved for economically weaker section in the approved housing projects as per Govt. policy. For example if the total expenditure made by the developer is Rs. 100 per unit of EWS and the weighted average deduction is 150% then the developer will deduct Rs. 150 in his computation of income.
Real Estate Development Reserve:
A new section similar to section 33AC should be introduced for the residential real estate business. This will provide a boost to overcome the shortage of housing in India.
Deduction for Real Estate Development Reserve Account:
Where the gross total income of an asessee includes any profits and gains derived from the execution of a residential project approved by the local authority on or after 01.04.2011, there shall, in accordance with and subject to the provisions of this section, be allowed, a deduction of an amount equal to 100% of the profits and gains derived from the execution of such residential project, in computing the total income of the assessee.
The deductions under this section shall be allowed only if the following conditions are fulfilled, namely:-
- the assessee maintains separate accounts in respect of the profits and gains derived from the business of the execution of the residential project undertaken by him
- an amount equal to [such percentage of the profits and gains as is referred to in sub-section (1) in relation to the relevant assessment year]is debited to the profit and loss account of the previous year in respect of which the deduction under this section is to be allowed and credited to a reserve account (to be called the Housing Projects Reserve Account) to be utilized by the assessee in the manner laid down in sub section 3.
The amount credited to the reserve account under sub-section (1) shall be utilized by the assessee before the expiry of a period of four years from the end of the financial year in which the amount was credited for undertaking a new residential project for the purposes of the business of the assessee; and Until undertaking a new approved residential project, for the purposes of the business of the assessee other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India.
