Budget 2018 & Tax: Jaitley Stays Put Dashing Hopes Of The Common Man
While prospective homebuyers eagerly waited for February 1 with expectations of measures that would enable them to invest, Prime Minister Narendra Modi in an interaction with media indicated Budget 2018-19 was not going to be a populist one. That the common man wanted sop, the PM said, was a myth. Those who did not lower their expectations right then are deeply disappointed today.
In a Budget that had rural India has the key theme, the middle class salaried people did not have much to cheer, at least as far as the tax matters go.
“The government had made many positive changes in the personal income-tax rate applicable to individuals in the last three years. Therefore, I do not propose to make any further change in the structure of the income tax rates for individuals,” Jaitley said. The only relief that came to this large taxpayer base was a proposal to provide a standard deduction of Rs 40,000 per year in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses.
There has absolutely been no tax tweaks that would make investing in real estate any more lucrative for people who take the help of bank finance to make the purchase
Apart from basic exemption limit on income tax to be raised from Rs 2.5 lakh to Rs 5 lakh that would enable future buyers to save more, they were expecting the finance minister to increase the upper limit on deductions that could be claimed under Sector 80C of the Income Tax Act. Under Section 80C of the Income Tax (I-T) Act, home loan borrowers can claim deductions for repayment of the principle amount. The stamp duty and registration charges that buyers have to pay are also allowed as tax deduction under this Section 80C even if the money is paid from your own pocket. Since the upper of deductions is set at Rs 1.5 lakh, buyers often fail to get much benefit under this Section when they apply for home loans.
Some tweaking was also required in Section 80EE to turn fence-sitters into buyers. It was expected that the cap of deductions under this head should have been raised to at least Rs 2 lakh.
Recently, the Centre lowered the Goods and Services Tax rate to eight percent if one applied for a home loan under the credit-linked subsidy scheme under the Pradhan Mantri Awas Yojana. Otherwise, buyers have to pay a 12 per cent GST on purchase of under-construction properties. Many expected Jaitley to come to the help of buyers who are not eligible to apply for loans under the CLSS.
On the interest component that a home loan borrower pays, deductions could be claimed under Section 24 and Section 80EE of the I-T Act. The latter Section, meant for first-time homebuyer, became effective only after April 2013.
Recently, it was also indicated that a rate cut is not on the cards in the Reserve bank of India Monetary Policy Review on February 7. While interest rates are already at an all-time low, some tax tinkering was required to boost the confidence of homebuyers.