The Government in its revised discussion paper on the Direct Taxes Code (DTC) has offered several incentives to house buyers, in comparison to the proposals in the original draft unveiled in August 2009. The revised DTC proposes allowing tax sops for borrowers on the interest paid up to Rs 1,50,000 during a financial year on loans to buy a house. Also, there is a proposal not to tax rental income from house property on presumptive basis.
The revised DTC will be the basis on which the Government plans to put in place new tax laws, income-tax and wealth-tax laws, in the country. Some prominent features of the revised DTC, particularly with regard to immovable property are as follows.
Rental income calculation
the income accruing from rental property shall be gross rent minus the specified deductions. This will not be computed based on the presumptive rate of tax on the value or cost of construction acquisition. If the house is not let out, the gross rent will be taken as nil and no deductions would be permitted for taxes or interest paid if the house is acquired as an asset and not for personal use. This will be beneficial for the salaried class. The income from house property is proposed to be extended to all properties, even if the same is in the realm of trade, commerce or business.
Capital gains
The current distinction between short-term and long-term investment asset on the basis of the length of the asset’s holding will be removed. In case of an investment asset transferred anytime after one year from the end of the financial year in which it is acquired, the cost of acquisition will be adjusted on the basis of cost inflation index to reduce inflationary gains. Relief has also been proposed for rollover of investment asset if an individual or Hindu undivided family invests in a residential house.
Wealth tax
Under the revised code, the net wealth of an individual shall be the aggregate value of all the assets computed in accordance with the provisions of the code minus the aggregate value of all the debts owned by the person incurred in relation to the said assets. This will mean financial assets as well as deemed assets as reduced by exempted assets.
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