The Rental Profits Earned by the Builders Might Dodge the Finance Ministry For a 10-year Term

The ministry of finance might be looking at 10 long years of tax vacation for real estate developers on profits earned from rental housing to stimulate investment and increase the slow economy generation in the sector. The senior officials of the finance ministry are approaching the real estate market to come up with ways to defeat the challenges of the real estate market. Residential flats in Kolkata will fall under this regulation and therefore if these kinds of flats are let out will face the taxation rules. The builders have also been asked to make a note on the rental housing business model, here the expenses will be allowed to claim a deduction of the profit excused from tax for 10 years.

Over the past few years, the rate of investment has fallen from 36% of GDP to 29% the ministry of finance is certain that the reason behind this is the backlogs of the real estate sector. The ministry has already started consulting the industrial bodies on their demand from the budget 2019-20 which most probably will be tabled in the parliament in July. The GST council recently has made changes in the rate on new projects to boost up demand, the new tax rates set up accounts to 1% and 5% under affordable housing and others respectively, without Input Tax Credit (ITC) from 8% and 12% with ITC. Due to this reason, auspicious buyers would aim to purchase property in Rajarhat and other properties in Kolkata with the new GST tax rates. This regulation would not only account higher profit margins in the real estate sector nevertheless mark profit for the buyers as well.

The builders have it on them to choose between old tax rates with ITC and new ones without ITC only for the ongoing under-construction residential projects with one resolution that is to resolve input tax credit issues. It has been disputed and often fails to provide its services for the buyers so a resolution of this matter hung from a hook since a long time and on altering the rules, it seems buyers are relieved at last. The real estate developers, in fact, started demanding for a long time to the government to take steps to perk up the liquidity situation of developers and also reorganize their loans claiming that the sector is in financial pressure due to short of funding from banks and NBFCs.

BY LNN (Liyaans News Network)