Revised Direct Tax Code (DTC) Impacts Real Estate Sector
The revised Direct Tax Code (DTC), released and approved on June 15, is set to be implemented from 2011. The DTC aims to simplify existing Indian income tax regulations, including specific changes for the real estate sector.
Rental Income Taxation
The original DTC proposed calculating gross rent at a presumptive rate of 6% of the market value, acquisition cost, or construction cost, whichever was higher. The revised DTC shifts this calculation. Now, the actual rent received or receivable during the financial year will serve as the basis for calculating rental income tax.
Home Loan Interest Deduction
An initial proposal to eliminate the tax deduction on home loan interest has been reversed. The revised DTC maintains the tax deduction on home loan interest up to ₹1.5 lakhs for property purchases or construction. This revision is expected to incentivize residential property purchases.
Taxation of Unlet Properties
Properties that remain unoccupied will be excluded from tax computations. No tax deductions will be applicable against interest or other expenses for such properties. This clarification addresses the tax treatment of properties not generating rental income.