Budget 2013: Luxury Homes to Cost More

Bangalore: In the Union Budget for 2013-14, Finance Minister P Chidambaram has declared 2000 crore as Urban Housing Fund while making luxury homes more expensive by reducing service tax on flats that spans over 2000 square feet or prices in excess of 1 crore.  

This current budget has also provided 1 percent TDS on immovable properties that sold for more than 50 lakh. Besides, the Finance Minister has increased the limit for tax deduction by 1 lakh for new home buyers.

"...it is proposed to start a fund for urban housing to mitigate the huge shortage of houses in urban areas. I propose to ask National Housing Bank to set up the Urban Housing Fund and, in consultation with RBI, I propose to provide 2,000 crore to the Fund in 2013-14," remarked Chidambaram in his Budgetary speech.

The FM also planned to increase the allocation to the Rural Housing Fund from 4,000 crore to 6000 crore.

On luxury housing, Chidambaram stated that "Homes and flats with a carpet area of 2,000 sq ft or more or of a value of Rs 1 crore or more are high-end constructions, where the component of 'service' is greater. Hence, I propose to reduce the rate of abatement for this class of buildings from 75 per cent to 70 per cent," reports PTI.

"Transactions in immovable properties are usually undervalued and underreported. One-half of the transactions do not carry the PAN of the parties concerned. With a view to improve the reporting of such transactions and the taxation of capital gains, I propose to apply TDS at the rate of one percent on the value of the transfer of immovable property where the consideration exceeds 50 lakh," added Chidambaram.  

"The rate of abatement on homes and flats of above 2,000 sq ft or costing 1 crore and above has been reduced from 75 per cent to 70 per cent. Effectively, this translates into an increase in service tax outflow, which means that luxury housing will now become even more expensive," said Anuj Puri, Chairman and Country Head, Jones Lang LaSalle India.

"The TDS of 1 per cent to be charged on the transfer of immovable property is an obvious move to curb speculation and bring about improved reporting and accountability in high-value immovable property transactions," added Puri.

(With PTI inputs)