Paying taxes is one of the important aspects of annual financial planning. And, in 2021 since many people lost income due to the lockdown, the government of India extended the tax relief on home loans. Read on to know more about it.
Since the onset of the COVID-19 pandemic in the early part of 2020, the government of India imposed several lockdown measures to restrict the infection spread. However, the closure of the business activities due to the lockdown has had a tremendous impact on the economy. Several people have lost their jobs and income. And, while the government is taking several steps to revive the economy and restart the business, several people have already suffered major losses.
The COVID-19 lockdown hit almost every business sector, including tourism, construction, etc. But one industry that probably took the biggest hit was the real estate sector. To revive the sector, the Finance Minister of India while presenting the Union Budget 2021 announced a few measures. And, one of the most notable announcements was the extension on tax exemption for affordable housing for one year.
While reviving the economy and boosting growth, the government has identified ‘Housing for all’ and affordable housing as a priority sector that needs immediate attention. The finance minister specifically mentioned these sectors during her budget presentation. In the July 2019 Budget, the central government provided an additional income tax deduction up to Rs. 1.5 lakhs for home loan borrowers to buy affordable housing. The finance minister has now extended this tax deduction till 31st March 2022.
This announcement is welcomed by several people in India, and experts believe it is a wonderful initiative by the government to help people alleviate their financial distress caused by the COVID-19 pandemic and the subsequent lockdown measures. The tax benefit extension is sure to provide a massive financial relief for all.
And, to ensure affordable housing units for the migrant workers and other low-income labourers, the finance minister also announced an extension of tax holiday for one year on all affordable rental housing projects. In the Budget 2020, the government announced a tax holiday for one year to all developers and builders for affordable housing units.
With the announcements made by the finance minister, as expected, the affordable housing and rental housing sector has got a massive boost. Experts believe that the tax deduction benefit will keep the demand for affordable housing buoyant in 2021 too. Additionally, the real estate business analysts suggest that the one year tax holiday extension for affordable housing projects will spur new supply within the segment. In addition, the loans offered by the housing finance companies at competitive interest rates will encourage the home buying aspirants to apply for the loan and get one step closer to becoming home owners.
Apart from the tax benefits, the government announced other measures to boost the real estate sector. This includes a reduction in customs duty to 7.5% on steel. Also, the finance minister has proposed debt financing and setting up of Development Financial Institution for augmenting funds for the real estate sector. This is expected to provide an immediate boost to the sector and attract new and more investments.
For the retail homebuyers, all the tax benefits will mean the real estate prices will remain stable and they can afford buying a new home.