Sitharaman proposed to extend the date of loan sanction for availing the additional deduction of up to one lakh fifty thousand rupees for interest paid on loans taken for purchase of an affordable house by one more year in Budget 2020.
NEW DELHI: Nirmala Sitharaman, Minister of Finance, presented the Union Budget 2020-21 on February 1. This was the second budget in the second term of the current government.
“Fundamentals of the economy are strong and that has ensured macroeconomic stability. Inflation has been well contained. Banks saw a thorough cleaning up of accumulated loans of the past decade and then they were recapitalized. Companies were provided an exit through the IBC. Several steps on the formalisation of the economy were taken up,” said Sitharaman.
For realisation of the goal of ‘Housing for All’ and affordable housing, in the last budget FM had announced an additional deduction of up to one lakh fifty thousand rupees for interest paid on loans taken for purchase of an affordable house. The deduction was allowed on housing loans sanctioned on or before 31st March, 2020. In order to ensure that more persons avail this benefit and to further incentivise the affordable housing, Sitharaman proposed to extend the date of loan sanction for availing this additional deduction by one more year.
Further, in order to boost the supply of affordable houses in the country, a tax holiday is provided on the profits earned by developers of affordable housing project approved by 31st March, 2020. In order to promote the affordable housing projects, the finance minister propose to extend the date of approval of affordable housing projects for availing this tax holiday by one more year.
Concession to real estate transactions
Currently, while taxing income from capital gains, business profits and other sources in respect of transactions in real estate, if the consideration value is less than circle rate by more than 5 percent, the difference is counted as income both in the hands of the purchaser and seller. In order to minimize hardship in real estate transaction and provide relief to the sector, FM proposed to increase the limit of 5% to 10%.
Rs 100 lakh crore would be invested on infrastructure over the next five years. It consists of more than 6500 projects across sectors such as housing, safe drinking water, access to clean and affordable energy, healthcare for all, world-class educational institutes, modern railway stations, airports, bus terminals, metro and railway transportation, logistics and warehousing, irrigation projects, etc.
Finance Minister had launched the National Infrastructure Pipeline on December 31, 2019 of Rs 103 lakh crore.
Concessional tax rate for Co-operatives
Co-operative societies play an extremely important role in our economy in facilitating access to credit, procurement of inputs and marketing of products to their members. These cooperatives are currently taxed at a rate of 30% with surcharge and cess. As a major concession and in order to bring parity between the co-operative societies and corporates, FM proposed to provide an option to cooperative societies to be taxed at 22% plus 10% surcharge and 4% cess with no exemption/deductions. Further, FM also proposed to exempt these co-operative societies from Alternative Minimum Tax (AMT) just like companies under the new tax regime are exempted from the Minimum Alternate Tax (MAT).
The limit for Non-banking financial companies (NBFCs) to be eligible for debt recovery under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 is proposed to be reduced from Rs 500 crore to asset size of Rs 100 crore or loan size from existing Rs 1 crore to Rs 50 lakh.
Personal Income Tax and simplification of taxation
In order to provide significant relief to the individual taxpayers and to simplify the Income-tax law, Sitharaman propose to bring a new and simplified personal income tax regime wherein income tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions.
Under the new regime, an individual shall be required to pay tax at the reduced rate of 10% for income between Rs 5 lakh to Rs 7.5 lakh against the current rate of 20%.
For income between Rs 7.5 lakh to Rs 10 lakh he will pay at the reduced rate of 15% against the current rate of 20%.
Similarly for the income between Rs 10 lakh to Rs 12.5 lakh the taxpayer will pay at the reduced rate of 20% against the current rate of 30%.
The income between Rs 12.5 lakh to Rs 15 lakh will be taxed at the reduced rate of 25% against the existing rate of 30%. Income above Rs 15 lakh will be continued to be taxed at the rate of 30%.
Those earning up to Rs 5 lakh shall not pay any tax either in the old regime or in the new regime.
In the new tax regime, substantial tax benefit will accrue to a taxpayer depending upon exemptions and deductions claimed by him. For example, a person earning Rs 15 lakh in a year and not availing any deductions etc. will pay only Rs 1,95,000 as compared to Rs 2,73,000 in the old regime. Thus his tax burden shall be reduced by 78,000 in the new regime. He would still be the gainer in the new regime even if he was taking deduction of Rs 1.5 lakh under various sections of Chapter- VI-A of the Income Tax Act under the old regime.
The new tax regime shall be optional for the taxpayers. An individual who is currently availing more deductions & exemption under the Income Tax Act may choose to avail them and continue to pay tax in the old regime.