How Owners of Real Estate in India Win and Lose from Budget 2017

The 2017 Union Budget was a mixed source of joy to those who own realestate in India and who also pay income tax. An important section, Section 8oEE was reintroduced along with major modifications the most important of which is that under the new Union Budget those who finance a house are eligible for a tax deduction of 50,000 every year for the entire duration of the loan where as in its earlier avatar those who took a home loan were eligible for a tax deduction of only a total of 1 lakh rupees for a period of two financial years. There are however also other conditions that have to be met to receive a tax deduction under Section 8oEE.

Table of content

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 The First Housing Casualty of Budget 2017

Individuals who had been claiming a loss on a property they had rented out or on a property they had deemed to have rented out received a rude shock. The simple reason for this is that their tax exposure has increased. Earlier their rental losses were subtracted from their total income allowing them to pay tax on a smaller sum whereas now the losses deductible on rental income have been capped at 2 lakh rupees. Individuals and households that had, whether legally or illegally, used losses on rental income to pay lower taxes can no longer do so.

Tax Still Deductible on Missed EMI

According to Section 24 of the IT tax, as long as there remains an interest liability on a home loan, borrowers may still claim a tax benefit for the year. Hence even if a household or individual has failed to make EMI payments in a year, he is still eligible for a tax deduction on the EMI's.

Benefit Reversed if Property Sold Before 5 Years

The holding period to qualify for the long term capital gains has been reduced to 24 months. However according to a reputed property website in India, if the property on which an individual earned tax benefits is sold before a period of five years, all the tax benefits that had been accrued will be reversed. Hence the individual who benefited from the tax policy shall have added back to his or her income the deductions that had been claimed earlier.

Borrower Must be Owner or Co-Owner

Only a borrower who is an owner or co-owner is eligible for the tax deductions. If a property is in the name of a payers parents or spouse, the payer is ineligible from receiving any tax benefit even if he or she is the principal party paying the monthly EMI's on the home loan.

Conclusion

According to some property sites, the Union Budget for 2017-18 has been a reason to cheer as many preexisting loopholes have been resolved resulting in a budget that is fairer than many before.


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Prop Chill,
15 May 2017, 23:53
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