By: Anshumali Ruparel
The dust is fast settling on the euphoria about the income tax reliefs announced for individual tax payers in the Union Budget. The reality is gradually surfacing that there are neither queues for home loans nor a rush at the sales counters. The finance minister has been more cautious than generous.
“It is still too early to judge the impact of the Budget announcements. The benefits of the raised personal income tax ceiling come into effect only from the next financial year. While the implied savings may not be big enough to motivate home buyers directly, they will help create a more positive consumer sentiment,” says Shobhit Agarwal, MD, Capital Markets, JLL India, a real estate consultancy.
There are three main announcements in the segment of personal taxation which relate to property purchase. It is expected that home buyers with extra funds made available through these reliefs would go ahead and make purchase decisions. These reliefs are:
* The exemption limit up to which no income will be taxable has been raised from earlier Rs 2 lakh to Rs 2.5 lakh.
* The upper limit of deduction under Section 80C has been increased from Rs 1 lakh to Rs 1.5 lakh.
* The bar is raised for deduction of interest component in the home loan repayment amount from Rs 1.5 lakh to Rs 2 lakh.
“The aim is to save tax and make more disposable income available to individual tax payers to encourage them to spend or invest but there is no guarantee that it will flow the real estate way,” says Sushma Murthy, a Mumbai-based chartered accountant. “Besides, a salaried urbanite tax-payer is not looking at low-cost housing or budget homes, so other more attractive announcements regarding affordable housing do not impress or impact him,” adds Murthy.
However, tax planning can always begin this year. The quantum of tax that can be saved as an impact of these reliefs could be determined on the basis of the income tax-bracket the individual belongs to.
For example, under the tax bracket of 30 per cent, a tax payer may save a maximum of Rs 5,000 as per the first relief and maximum of Rs 15,000 each as per the next two reliefs. In all, he saves maximum tax of Rs 35,000 per annum as a result of the sops. Those in the tax-bracket of 20 per cent and 10 per cent would get tax-saving of maximum Rs 25,000 and Rs 10,000 respectively.
“Incentivising savings is a good growth driver but saving of Rs 10,000 to Rs 35,000 per year is not enough for the home buyer who is struggling to meet the rising prices of the residential properties across the country” says Naresh Mehta, a property consultant. “One must remember that due to these reliefs, income has not increased but one may have to show more income if one wants to save a few thousands in tax,” adds Mehta.
These reliefs are not aimed at the rich classes as there is no major change in the earlier tax-structure for very high continued…