Significant Changes in the Direct Tax Code (DTC)
On June 15, the revised draft for the Direct Tax Code was released. This initiative by the Indian government aims to simplify the current income tax laws. The government is awaiting parliamentary approval to implement the code starting April 1, 2011.
Key Changes Affecting Real Estate
Short-term Capital Gains: The draft proposes taxation on any gain or loss made from the sale of an asset within a year of purchase.
Long-term Capital Gains: After one year of purchase, the taxation policy on any gain or loss from the sale of an asset will align with the long-term capital gains tax policy.
As per the draft code, starting from April 1, 2011, the discount rate calculation will no longer consider April 1, 1981; instead, April 1, 2000, will be used as the reference date.
Rental Income Taxation Policy: The proposed code suggests that the gross rent should be calculated based on the actual rent received or receivable during the financial year.
Home Loan Interest Rates: The draft DTC plans to continue deducting tax on the interest paid on home loans up to Rs 1.5 lakh for the construction or purchase of residential property.
Self Occupied House Property: Self-occupied house properties (those not let out) will be eligible for a tax deduction of up to Rs 1.5 lakh on account of interest.
Impact on Home Buyers and Owners
This revised draft code of the DTC appears to be a significant benefit for home buyers and homeowners. The revisions seem advantageous for all stakeholders, including investors and developers.