FISCAL CONCESSIONS FOR HOUSING


This Ministry has been pursuing with the Ministry of Finance the matter of provision of various fiscal incentives for the Housing Sector. The existing concessions granted under Income Tax by the Ministry of Finance are as under:-

1.Section 80 IA of IT Act exempts 100% income from infrastructure projects from income tax for ten consecutive years

2. Section 80 IB(10) of IT Act exempts 100% income  from housing projects from  income tax provided.

(a) Project is approved before 31st March, 2007

(b) Project is completed within in 4 years from the last day of financial year in which it is sanctioned.

(c) Project is on a minimum plot area of one acre.

(d)Maximum built up area of residential unit is 1000 sqft for Delhi & Mumbai 1500 sqft for other places

(e) Built up area of shops and other commercial establishments is 5% of built up area or 2000 sqft. whichever is less

3. Section 24 of IT Act

Under Sec. 24 deduction on account of interest payment on housing loans is permissible to owners of rented dwelling units to the fullest extent.  In case of owner occupied houses the limit is set at Rs. 1.5 lakh.

4. Section 54 of IT Act

Capital gain from transfer of residential property if invested in acquiring one residential house is exempt from tax

5. U/S 36(1) of IT Act

 40% of profit derived from business of providing long term housing finance is deducted  from income provided it is  carried to  special reserve. Before 1994-95 if used to be 40% of total income

6. U/S 36(1)(Viia) of IT Act

 Deduction for bad and doubtful debts equivalent to 10% of the doubtful and loss assets is available to banks

7.U/S 10(23G) of IT Act

Financing Housing Projects qualifies for exemption and not individual housing finance.

8. Risk Weight(RW)

Risk weight on housing loans has been increased from 50 to 75 % as far the banks but capital adequacy requirement (CAR) for HFCs is maintained at 12% against 9% for banks.