Govt rules out tax incentive beyond `2 lakh for 2nd home
Ruling out rollback of the proposal to restrict tax incentive for second home to Rs 2 lakh per annum, Revenue Secretary Hasmukh Adhia on Saturday said there is no point in subsidising purchase of second property by those who have surplus funds.
Moreover, he added that the tax incentive for second home loan borrower is being "virtually misused." Citing limited resources, he said, it is prudent to subsidise first-time buyer and not the second property owner who is not staying in that but earning income from the second unit.
The Finance Bill 2017 has restricted set-off of loss towards second home against other heads of income up to Rs 2 lakh 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.
"Government resources are very very limited. The question is, should the government be subsidising first-time home owners who are occupying 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 here.
He cited an example: "If I have already my own house, I buy a new property by taking a bank loan of Rs 1 crore, the interest on it is Rs 10 lakh per annum and I rent it out to somebody who gives out Rs 3 lakh as rent, the remaining Rs 7 lakh 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 lakh in addition to Rs 2 lakh advantage.
"So, why should the government bear the cost of second house acquisition, that was the question. We have a lot of people to be given affordable housing, we need to help them out... so the revenue loss was huge and people were virtually misusing it," he said.
Earlier, expressing confidence over positive impact of demonetisation, Economic Affairs Secretary Shaktikanta Das on Saturday said that India's growth remains much stronger and government is committed to push growth momentum. "For this year's GDP growth, we have to wait till March-end. But next year, it will be upwards of 7 per cent," Das stressed.
While drawing on Finance Minister Arun Jaitley's statements, the secretary said that there will be transient impact of demonetisation on the economy, but it will not spill over to the next fiscal. The economy of the country will grow upwards of 7 per cent next fiscal."
"India is remaining afloat and doing well amid global headwinds. India should stick to its policy of open movement of goods services and people and there is no need to make knee jerk reactions to global scenario," Das said while speaking at the Executive Meeting of FICCI in New Delhi on Saturday.
Hailing the Union Budget 2017, the Economic Affairs Secretary said, "Any form of protectionism is not sustainable in the long run. The budget has maintained consistency on tax policy and reforms and GST will be a reality in the end of first quarter of Financial Year 2018."
Listing various reforms measures as announced in the Budget, Das spoke of gains for farmers from integration of spot and derivative market in commodity. He also dubbed announcement on contract farming and UGC as very big reforms.
Speaking at the seminar, Finance Secretary Ashok Lavasa said that the government has already implemented 54 per cent of the recommendations of the Expenditure Management Commission. "There are many more which are in the process of being addressed," he said, adding, "We are in the process of revising our General Financial Rules (GFR). These are the rules by which all government expenditure is controlled and regulated."
Speaking on the occasion, Central Board of Direct Taxes Chairman Sushil Chandra explained and clarified the provisions of the Finance Act and reiterated that the government was simplifying the tax regime to the extent possible for industry and individual taxpayers. The government was employing technology to make tax assessment faceless.
Earlier, Dinesh Kanabar, who is Chair, FICCI Committee on Taxation, gave snapshots of the plusses and minuses of the budget proposals with regard to direct taxation. According to a FICCI analysis on Economics of Union Budget 2017-18, the budget would strengthen the economic muscle of the country.