[ecis2016.org] The government has refused to roll back the proposal to restrict tax incentives for second homes to Rs 2 lakhs per annum, saying that there is no point in subsidising the purchase of a second property by those who have surplus funds
Stating that the tax incentive for second home loan borrowers is being virtually misused, revenue secretary Hasmukh Adhia, on February 4, 2017, citing limited resources, said that it was prudent to subsidise first-time buyers and not the owners of second properties, who do not staying in it but earn income from the second unit.
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The Finance Bill 2017 has restricted the set-off of loss towards second home against other heads of income up to Rs 2 lakhs under Section 71 of the Income Tax Act. Under the present dispensation, there is no such limit for set-off of loss from house property, which is mainly the difference between the rental income and interest on home loan. In other words, a buyer could deduct the entire net interest paid on the home loan.
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“The government’s resources are very limited. The question is: Should the government be subsidising first-time home owners who are occupying their own house, or should the government be subsidising the second acquisition of the property by people who have got surplus money to invest in real estate?” Adhia said, while addressing industry representatives.
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He cited an example: “If I already have my own house and I buy a new property by taking a bank loan of Rs 1 crore, the interest on it is Rs 10 lakhs per annum. I rent it out to somebody who gives out Rs 3 lakhs as rent and the remaining Rs 7 lakhs, you could offset against your salary income or business income.” The loss to the government for the second house were almost one third of that, he said, adding that it came to about Rs 3 lakhs, in addition to the advantage of Rs 2 lakhs. “So, why should the government bear the cost of the second house acquisition? We have a lot of people who need affordable housing. We need to help them out. So, the revenue loss was huge and people were virtually misusing it,” he said.
The Finance Bill, 2017, proposes to restrict such set-off of house property loss to Rs 2,00,000 per annum only. Balance loss, if any, will be carried forward to be set off against house property income of subsequent 8 years. Hence, individual tax payers having loss of more than Rs 2,00,000 will now have a higher tax outgo. “In line with the international best practices, it is proposed to insert sub-section (3A) in the said section, to provide that set-off of loss under the head ‘Income from house property’ against any other head of income, shall be restricted to Rs 2 lakhs for any assessment year,” the Finance Bill 2017 said.
Source: https://ecis2016.org/.
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Source: https://ecis2016.org
Category: Lifestyle
