What is the impact of changes made in tax policies?

In the last Budget, several changes have been introduced in the tax policies. However, this has been a welcome move, and not many people had expected these changes to be made. Some of the changes introduced during this Budget can have a prominent impact on the tax players. One of these changes has been the relief that one can avail in the form of rebate, if you have income up to INR 5 lakhs. Other benefits include the exemption of notional rent for properties that are self-occupied (the second homes). The capital gains have been increased from INR 2 crore from the old cap of INR 1 crore. This move is likely to benefit the real estate sector.

Over the last few weeks, the impact of these changes has been discussed extensively. However, it is important to consider the larger changes in the tax system that is likely to be witnessed in the coming years. From this perspective, one may focus on four points:

The government is keen to maintain the tax base while expanding. In case the exemption for people earning up to INR 5 lakh gets affected as a result of changes in the slab rates, it may result in a drop in the number of taxpayers who are required to file the returns. The tax relief has been structured in the form of a rebate, that indicates that the filing obligations will remain intact.

The Budget has recognized certain changes from the social perspective, in the way people work and live. The notional rent has been exempted on self-occupied homes, that reflects that internal migrations have been increased. A large number of individuals need second homes these days, as they need to support their children and parents who reside in other places. The taxpayer has been permitted to roll over the gains when a house is sold. They can now invest in two houses, which comes as a benefit to them.

Significant changes have been taken place in the real estate sector, considering the Finance Bill. For affordable housing projects, an extension has been made for the tax holiday and the provisions related to the taxation of notional rent on inventory that is unsold have been modified. The latter provision is now applicable to properties that remain unsold for more than 2 years from the date of completion.

The budget also focuses on the importance of technology. The overall experience of the taxpayers has been improved and the tax base has been expanded. It remains to be soon how the return scrutiny will take place. It is evident that the real estate sector has benefitted from the changes made to the tax policies. For investors, this is a good time to make real estate purchases in India.