Changes to income tax legislation that can help homebuyers in 2020

Information about income tax legislation that can help homebuyers in 2020

Although the government has been doing its best to boost the market, the real estate sector has been suffering for quite some time. Real estate in navi mumbai the federal govt. (Government) has reduced GST rates and sought to rationalize residential unit GST prices. The government has lowered the GST prices to as little as 1 percent for the affordable housing section and the GST rates have been reduced to 5 percent from the earlier 12 percent rates for non-affordable housing. The government has also broadened the scope of the tax exemption gain applicable to developers as regards developments in the affordable housing category. Nevertheless, there is room for further steps, especially for individual taxpayers.

 

Real estate graph, real state homes, tax,

img1: Real Estate in navi mumbai

 

Rationalization of tax deductions and refund under Section 87A

Under Section 87A an individual taxpayer has generally entitled to a refund of up to Rs 12,500 in the event that the total income is below Rs 5 lakhs. Once this threshold limit has been crossed, the tax payer completely loses this Rs 12,500 rebate, even if the taxable income exceeds the threshold by just a few hundred rupees.

This sharp increase in the tax liability of Rs 12,500, once the income exceeds this Rs 5 lakhs cap, induces many taxpayers to manipulate and hold the income below Rs 5 lakhs, to take advantage of this gain, particularly the self-employed, who have the potential to manipulate the taxable income. Because the banks and housing finance companies lend on the applicant’s income, these taxpayers are unable to get home loans of the value they would otherwise have been entitled to if they had declared their real income.

 In such cases, the government may incorporate the provision of granting marginal relief for the order to discourage such abuse, to provide that the increased tax liability shall not exceed the amount by which the taxable income reaches the threshold limit of Rs 5 lakhs. For example, if a person’s taxable income is Rs 5.05 lakhs, his tax liability actually amounts to Rs 13,500, which exceeds Rs 5,000 (the amount by which the taxable income crosses the Rs 5 lakhs threshold). In such marginal cases, if the government introduces the benefit of marginal relief, the tax liability, in this case, will not exceed the incremental revenue of Rs 5000. Under Construction Property in Navi Mumbai these exemptions will enable private taxpayers to offer full tax income in the event that the taxable benefit meets just a few thousand threshold revenues.

 

 income tax legislation, income taxes, homes buyers

img2: tax deductions

 

The Individual tax slabs

Now there are three individual tax slabs. After the minimum deduction of Rs 2.50 lakhs, for individual taxpayers who have not completed 60 years and for all HUFs, the tax rate is 5 percent up to Rs 5 lakhs. After this initial 5 percent tax rate, for those with income between Rs 5 lakhs and Rs 10 lakhs, the slab increases steeply to 20 percent. This causes taxpayers mentally to distort their income in order to escape the surprise of a substantial increase in tax obligation compared to taxable income. After this initial 5 percent tax rate, for those with income between Rs 5 lakhs and Rs 10 lakhs, the slab increases steeply to 20 percent. This causes taxpayers mentally to distort their income in order to escape the surprise of a substantial increase in tax obligation compared to taxable income. The government needs to get the details by filing ITRs, the simple exemption cap may not be changed.

Nevertheless, in order to rationalize the tax slabs, to prevent individual taxpayers from exploiting their taxable income, and to rationalize the tax slab system based on the ability to pay, the State could:

  • Hold the minimum exemption up to 2.50 lakhs.
  • Retain the tax slab limit of 5 percent from Rs 2.50 to Rs 5 lakhs.
  • Introduce a new 10 percent tax bracket on revenue between Rs 5 lakhs and Rs 10 lakhs.
  • Set the tax rate of Rs 10 lakhs and Rs 25 lakhs at 20 percent for the income slab.
  • Set a slab limit of 30 percent for earnings between Rs 25 lakhs and Rs 1 crore.
  • Set the tax rate at 40 percent, without any surcharge, on wages above Rs 1 Crore.

 

help homebuyers in 2020, strategy for home buyers.

img3: Individual tax slabs

 

Increase in the amount of loss to be offset against income

Before 2018, there was no limit on the amount of loss under house property that could be offset against other income of the year. Nevertheless, the 2018 budget imposed a maximum of Rs 2 lakhs, beyond which losses measured under the head of house property cannot be balanced against other revenues. Looking at how much loan and interest one has to pay, this amount is not enough. This loss cap, which can be set against other revenue, should be extended to Rs 5 lakhs to support the small taxpayers in urban areas.

 

Rationalization of GST rates for New Projects (under-construction houses)

The average home buyer is not tax-savvy and may not appreciate the nuances of tax legislation. The GST Council’s recent decision to lower GST rates for different housing categories, followed by an option for the developer, migrate or not migrate to the reduced rate scheme for pending projects, has caused confusion in home buyers ‘ minds.

 

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Disclaimer: The views of this expressed above are for informational purposes only based on the industry reports & related news stories. Navimumbaihouses.com does not guarantee the accuracy of this article, completeness, or reliability of the information & shall not be held responsible for any action taken based on the published information.
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