Budget 2023-24: Realty Left Wanting For More Despite Tax Tweaks

Primarily aimed at benefiting the ‘hard-working middle class’, the Budget proposes to extend the benefit of standard deduction to the new tax regime as well.

Even though Finance Minister Nirmala Sitharaman ignored most of the long-standing demands of India’s real estate sector when she presented her fifth Union Budget on February 1, 2023, the FM certainly had enough for everyone in her magic bag.

Aside from increasing the basic exemption limit to Rs 7 lakh as against Rs 5 lakh under the new tax regime that would help India’s middle class save more, Sitharaman also had a slew of measures to boost affordable housing in the country. The combined effects of these two moves, say sector experts, are focused on long-term growth of the sector.

Primarily aimed at benefiting the ‘hard-working middle class’, the Budget proposes to extend the benefit of standard deduction to the new tax regime as well. It also lowered the number of tax slabs under the new tax regime from 6 to 5.

“The Budget has given more money into the hands of individuals and households which would, to a large extent, ease out the increasing pressure on account of home loan EMIs and rising home prices,” says Samantak Das, chief economist, and head of research and REIS, India, JLL.

“The government has reinforced its commitment to providing housing for all by substantially increasing the funding for the Pradhan Mantri Awas Yojana, from Rs 47,500 crore last year to Rs 79,000 crore. This extra funding will help ensure that both urban and rural homes are built quickly and up to the required standards,” says Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory.

However, the government move to cap the deduction from capital gains on investment in residential houses under Sections 54 and 54F at Rs 10 crore may hamper growth for the luxury housing sector.

“So far there was no cap on deduction an individual or an HUF can take from gain arising from the sale of a house property or other investments by reinvestment in another house property. In the current Budget proposal, if the investment in new house property is more than Rs 10 crore, the deduction amount will be limited to Rs 10 crores only, explains CA Manish P Hingar, founder at Fintoo.

“It is going to impact the ultra-high-networth people as they need to pay long-term capital gain on the sale of house property with big-ticket deals, but it will not be a major setback as you can still take a deduction up to Rs. 10 crore,” he adds.