Policy and tax reforms providing a boost to the sector
With a view to further incentivize the real estate sector in India, the Finance Minister has announced several policy initiatives. Banking on the success of SWAMIH Fund I , another fund (SWAMIH Fund 2) of INR 15,000 crores will be established as a blended finance facility with contributions from the Government, banks and private investors. This is expected to accelerate completion of stalled housing projects and bring relief to home buyers. Further, policy initiatives have been introduced for Urban development through establishment of Urban Challenge Fund, of INR 1 lakh crore which will play a pivotal role in growth of cities.
- Annual value of self occupied property
-
- The annual value of property is considered as NIL while computing income under the head 'house property' in case of:
-
- Self occupied house; and
- Another owned house, where it cannot be occupied due to employment, business or profession carried on at any other place.
- The annual value of another owned house will now be considered as NIL, even if, the owner cannot occupy the same due to any reason including employment, business or profession carried on at any other place.
- This amendment is effective from 1 April 2025.
- Benefit of lower tax rate extended on long-term capital gains to business trust
-
- Income of business trust other than short term capital gains on equity shares listed on recognized stock exchange, unit of equity oriented fund, unit of business trust (listed securities) and long term capital gains on assets other than listed securities is taxable at MMR.
- Due to this long term capital gains on listed securities is taxed at MMR in the hands of business trust.
- In order to rationalise taxation of business trust, long term capital gains on listed securities will now be taxed at 12.51% instead of MMR.
- This amendment is effective from 1 April 2026.
- Rationalisation of threshold for TDS on rental income
-
- Any person, other than individual and HUF, paying rent of an amount exceeding INR 2,40,000 during the year was required to deduct tax at the rate 2%/10%.
- The threshold amount of INR 2,40,000 has been amended to INR 50,000 per month.
- This amendment is effective from 1 April 2025.
- Amendment in input tax credit provisions
-
- The CGST Act provides for restrictions on claiming input tax credit on certain items.
- Amendment has been introduced in the CGST Act relating to input tax credit provisions, to replace 'plant or machinery' with 'plant and machinery'.
- This amendment is effective from 1 July 2017.
- Key policy announcements
-
- Urban sector reforms to be incentivized for urban land development.
- Urban Challenge Fund of INR 1 lakh crore to be set-up for implementation of proposals announced in July 2024 Budget such as 'Cities as growth hubs', 'Creative redevelopment of cities' and 'Water and Sanitation'. An allocation of INR 10,000 crore is proposed for Financial Year 2025-26.
- With the success of SWAMIH Fund I, another fund (SWAMIH Fund 2) of INR 15,000 crore will be established as a blended finance facility with contribution from Government, banks and private investors for expeditious completion of 1 lakh units in stressed housing projects.
- With a focus to develop 50 tourism sites across country, land for building key infrastructure to be provided by states and hotels in such tourism sites will be included in Infrastructure Harmonised Master List. This will also facilitate employment led growth in these sites.
Impact Analysis
The Budget aims to continue the Viksit Bharat journey with a focus on real estate and infrastructure sector which is evident from strong emphasis on urban development and setting up of another fund under PPP for providing support to stressed housing projects. With the removal of deemed taxes on second homes and the tax slab revision exempting income tax on income up to INR 12 lakhs is expected to increase interest and activity in the housing market. In essence, the Budget is geared towards sustainable development and driving long term growth in the real estate sector.
Glossary
MMR – Maximum Marginal Rate
TDS – Tax deducted at source
HUF – Hindu Undivided Family
CGST Act – Central Goods and Services Tax Act, 2017
SWAMIH – Special Window for Affordable and Mid-income Housing
PPP – Public Private Partnership
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
