Union Budget’16- A much awaited relief for home buyers

The Union Budget 2016 has, by far, turned out to be a win -win situation for all. From individuals to the corporate Inc and especially for those who are desperately waiting to buy their first home.

However, the budget states equal challenges as much as the opportunities it offers!

“This budget is welcomed &we congratulate honorable Finance Minister, Shri Arun Jaitley, for trying to meet the expectations of the consumers and addressing their concerns through the new reforms in the budget.
For the common man the following key measures assure better rewards:
a)    Rebates increased for earnings less than 5 lacs.
b)     First home buyers to get an additional deduction of INR. 50,000 on loan interest for loan amounts upto 35 lacs for houses less than 50 lacs.
c)    Women members get subsidy for gas connections for poorer households.

Many policies for the rural sector (total allocation of 87765r) will increase the output which will directly impact the economy favorably” stated by Mr. Ranjit Naiknavare, Director – Naiknavare Developers

He further adds“The three major aspects that have been proposed of real estate development are:
a.     Increase in HRA deduction (24000 to 60000 per annum)
b.    Removal of dividend distribution tax on REITS which will enable major investments in retail office and,
c.    Income tax benefits for projects with smaller flatsless than 60 sqm in non-metro cities if completed within 3 years which will ensure timely handing over of projects.

The vexatious land records are being digitized & this will help overall transparency in real estate projects which might encourage foreign funds capital inflow.

The current road construction stands at 16-18km per day & this will go up with additional  measures (additional 218000 Cr to be spent)  which will allow for 10000 km of roads in 2016- 17, that are proposed in the budget.

Also airports are being revamped and this will further ease travel and indirectly benefit the real estate.

At present, the current land acquisition act makes it difficult to acquire lands and the PSUs are encouraged to make land available for development.The shops and establishment act is being revamped & amongst other things, smaller high street shops will be allowed to be kept open
all seven days easing the requirements of the common man.

The Budget made a strong case for promoting start-ups in India with 100% tax rebate on profits announced for them for three years. This will encourage mixed use properties to cater for this segment. If there is some clarity on GST and implementation for the direct tax code, then we will see a much better growth for the economy.”


Mr.Ranjit Naiknavare concludes by giving out key highlights from the Budget, which could affect an individual:

1) 10 % Dividend Distribution Tax: Additional tax at the rate of 10% of the gross amount of dividend earned will be payable by the recipients receiving dividends in excess of 10 lakh per annum. Kindly note, this is for income from only company stock dividends and NOT from MF dividends.

2) 0.5% KrishiKalyanCess: Just like Swachh Bharat Cess, consumers will have to now bear introduction of KrishiKalyanCess of 0.5% on service tax for the welfare of farmers. So total service tax will be 15% from June 1st onwards

3) 40% of NPS Withdrawal taxfree: Up to 40% of the corpus withdrawal to be tax exempt in the case of National Pension Scheme (NPS). With an additional INR50000of tax benefit beyond 80C, NPS to become attractive for investors. The remaining 60% can be tax-free too, if used for buying an annuity.

4) Only 40% EPF withdrawal to be taxfree: To create a level playing field amongst retirement products, Government seems to be moving EPF from 100 % EEE regime to partial EEE regime to put it on par with NPS. This is applicable only on new investments from now on.

5) 1.5 % Service tax reduction for Annuity Policies: Service tax to be reduced from 3.5% to 1.5% on premium of single premium annuity policy from insurance companies and pension funds.

6) 60 K Deduction for House Rent: Deduction amount claimed against rent paid to be increased from 24,000 p.a. to 60,000 p.a. under Sec 87A. Not many know about this. Basically, this is useful to people staying on rent but do not have HRA as an income component.

7) 5,000 Rebate for Income upto 5 Lakhs: Rebate is increased from INR 2000 to INR 5,000 for an individual having annual income of up to Rs.5 lakh per annum. Now, such individuals can avail total rebate of Rs.5000 in an assessment year.

8) INR5000 additional Tax deduction for home buyers: First time home buyers to get an additional deduction of Rs.50, 000 on the interest component of EMI. The value of such houses should not exceed INR 50 lakh and loan 35 lakhs.

9) 15 % Surcharge on 1 Crore+ Income: Surcharge has been raised from 12% to 15% on the persons, other than companies, firms and cooperative societies having income above Rs. 1 Crore.