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Tax benefit on under construction house: Time limit to be raised from 3 to 5 years

Posted by BrickAcres on March 1, 2016
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Budget 2016 proposes that tax benefit will available if the
acquisition or construction is completed within five years from
the end of the financial year in which capital was borrowed
instead of three years.

The industry was probably expecting this to happen. The delay in
delivery of real estate projects was taking a toll and tax
benefits were being denied to buyers.

The increase in time period for acquisition or construction of
self-occupied house property for claiming deduction of interest
should bring in some relief to taxpayers.

Currently section 24 provides that interest payable on capital
borrowed for acquisition or construction of a house property shall
be deducted while computing income from house property.

The deduction of an amount of Rs 2 lakh is allowed where a house
property referred to in sub-section (2) of section 23
(self-occupied house property) has been acquired or constructed
with capital borrowed on or after the 1stday of April, 1999 and
such acquisition or construction is completed within three years
from the end of the financial year in which capital was borrowed.

In view of the fact that housing projects often take longer time
for completion, it is proposed that second proviso of clause (b)
of section 24 be amended to provide that the deduction under the
said proviso on account of interest paid on capital borrowed for
acquisition or construction of a self-occupied house property
shall be available if the acquisition or construction is
completed within five years from the end of the financial year in
which capital was borrowed.

It is also proposed to provide that standard deduction of 30%
shall be allowed against the amount received on account of
unrealised rent while computing the house property income.

Further, it is proposed to provide that the date of agreement
fixing the amount of consideration for the transfer of immovable
property and not the date of registration shall be taken for the
purposes of computing capital gains in case of transfer of
immovable property if any payment in consequence of such
agreement has been made by the purchaser of the property through
any mode other than cash.

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