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Budget 2017: A mixed bag for housing-related taxes

Jaitley’s Budget announcements brought some cheer, but also came with certain dampeners for property owners
By Preeti Kulkarni | February 01, 2017

Finance Minister Arun Jaitley’s Budget announcements brought some cheer, but also came with certain dampeners for property owners and tenants. Here are some of them:

1. Long-term capital gains tax on sale of property

The holding period for any gains made from sale of immovable property to be considered long-term, and thus attract lower tax, has been brought down from three years to two years. Moreover, the base year for calculating indexation has been shifted to April 1, 2001, from April 1, 1981. The government will also expand the basket of investment products where capital gains can be invested in order to escape tax incidence.

2. Tax Deduction at Source (TDS) on Rent paid

The Budget has introduced a new provision that requires an individual to deduct TDS of 5% while paying rent, if it exceeds Rs 50,000 a month. “Claiming HRA will now become a problem. For rent exceeding Rs 50,000 a month, TDS is required to be secured,” says Amit Maheshwari, partner with tax consultancy firm Ashok Maheshwary & Associates. So, if you fall in this category and claim House Rent Allowance (HRA), you will have to prepare for increased paperwork, though the process prescribed has been kept simple. You will have to deduct and deposit the amount through a challan-cum-statement once in a financial year. “Further, the deductor shall not be required to obtain TAN or file any separate TDS return for this purpose,” the Budget statement says.

3. Disappointment for let-out property owners

Finance Minister Arun Jaitley has sought to bring tax benefits on interest deduction on let-out property and self-occupied property on par by restricting set-off of loss from house property against income under any other head to Rs 2 lakh. The loss not set off can be carried forward for set off against house property income for eight assessment years. “Limiting house property loss for adjustment against other income up to Rs 2 lakh in a year would adversely affect those who have rented out their house and their loss after adjusting mortgage interest is more than 2 lakh,” points out Kuldip Kumar, Partner and Leader, Personal Tax, PwC.



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