1. Boosting Housing Construction ·

• Repayment of Housing loan (Section 88)
  Tax rebate @ 20% out of Income Tax payable in respect of repayment of housing loans upto Rs. 20,000/- is insignificant. This cap of Rs.20,000/- should be removed. Alternatively, it should be increased upto Rs. 1.0 lakhs.
• 100% allowability of interest as deductible expense in case of self-occupied Residential house
  Deduction of interest on housing loans used for self-occupation is allowed upto an amount of Rs. 1.0 lakhs whereas interest on housing loans used for rental purpose is allowed in full. This disparity needs to be removed. Further, cap on completion of construction by 31st March, 2003 is counter-productive and hence needs to be removed to boost housing construction.
  
  This will go a long way to fulfil National Housing Policy's objectives and Government's programmes to encourage people to own a housing unit.
• Deduction of Construction Cost
  There is a need to introduce a separate section under Chapter VI-A wherein 100% cost of construction is allowed as deduction from the gross total income over 5 years in phased manner.
  This will give immediate impetus to the economy with enhanced capacity utilisation of related industries such as steel, cement, transportation, etc. leading to increase revenue by way of excise and other taxes.
• Disparity in Depreciation Rates
  Let out Properties At present, the owners of plant & machinery, motor vehicles, etc. given on lease for business purposes, are allowed the benefit of depreciation allowance out of their business income. However, the owners of house property who have let out their properties are not allowed similar benefits of depreciation as rental housing is not being recognized as a business activity. As housing is a national asset and needs regeneration by way of modernisation /redevelopment of housing stocks, it is, therefore, suggested that all properties completed on or after 1st April 2001 should get the depreciation allowance @ of 20% p.a. This aspect needs to be provided by incorporating a suitable explanation under sub-section 1 of Section 32.
• Properties Constructed for accommodating employees
  Buildings constructed by an employer for accommodating his employees are permitted a depreciation allowance @ 5%. However, if the plinth area of the dwelling unit is less than 80 sq. mtrs the depreciation allowance is increased to 40%. The basis of this disparity is irrational and hence needs to be removed.
  It is suggested that under rule 5 (Appendix I) table prescribing the rates at which depreciation is admissible in item 3(i) of the block "Buildings" the words "with plinth area not exceeding 80 square meters" be substituted by the words "built by employers for accommodating its employees".
• Deletion of Chapter XXC - Refer Annexure 'A'

• Upward Revision in value for clearance under Sec. 230-A for registration of transfer of immovable property
  
  By virtue of Section 230-A, where any document is required to be registered u/s. 17 of the Indian Registration Act, 1908, purports to transfer assign or extinguish the right, title or interest of any person to or in any property valued at more than Rs. 5 lakhs, then the registering officer shall not register such document, unless the Assessing Officer certifies that such person has either paid or made satisfactory provision for payment of all existing tax liabilities and registration of such document will not prejudicially effect the recovery of such taxes.
  
  The value of five lakhs was substituted for two lakhs by the Finance Act, 1995, with effect from 1-7-1995 and, as such, there is an immediate need to raise this limit upto Rs. 50 lakhs. Alternatively, this limit can be linked with the limits fixed under Rule 48K of Section 269 UC.
  
  
• Development of infrastructure (Physical and Social) in the definition of Infrastructure:
  
  The present definition of infrastructure does not cover all aspects of physical, social, environmental and economic infrastructure as also various utilities necessary for urban development.
  This has been partially accepted by inclusion of water treatment and solid waste management in the definition. The inclusion of remaining aspects of physical and social aspects in the ambit of urban infrastructure needs to be followed up.
  
  
• Deemed export status and other measures to give boost to foreign exchange earnings
  
  Real Estate Developers have been making concerted efforts for sale of property to NRIs and other eligible persons abroad to mobilize foreign exchange. This is being done at huge marketing cost. Yet no incentives are being made available for earning valuable exchange. It is strongly felt that foreign exchange earned out of sale proceeds of real estate be considered as deemed export and proportionate income, as in the case of commodity exporters, be exempt from taxation. Such a step would encourage the real estate developers to increase their activities in sale promotion outside India and mobilise more foreign exchange.
  
  In similarly placed industries, like the Hotel Industry in particular, even comparatively lesser efforts are involved but the foreign exchange earned from foreigners merely on account of their stay in the hotels is treated as deemed exports. In the case of sale of real estate, on the other hand, tremendous efforts and marketing inputs are being applied. Hence, there is every justification to treat the foreign exchange earned from sale of real estate as deemed exports to be eligible for tax exemption u/s 80HHC.
  
  It is suggested that under sub-section (i) in Section 80 HHC after the words 'export out of India of any goods or merchandise' the following words be included:
  
  "or sale proceeds of real estate developers for selling properties to NRIs/foreign nationals."

Monetary and Credit Policy

Separate allocation of 10% within the overall 40% lending for priority sector for housing.

Stamp Duty

Stamp duty should be brought down to 3% in all states from the current high levels of 10% and above.

At present four states have reduced their stamp duty to 0.1% for mortgage backed securitisation of housing loans. This is restricting the inflow of funds for securitisation in other states.

All other states need to follow up this measure.

The parties to the transfer circumvent the provisions of the Chapter by splitting the transaction into several with each transaction involving consideration of less than the prescribed limit. The transactions are split either in terms of the interest in property, the number of transferees or in the physical dimensions of the property.

Several ingenious methods like joint collaboration projects are undertaken to defeat the purpose of the Chapter.

Taking into account the above factors, the Expert Group constituted by the Government in 1996 to review the existing Act and suggest changes, has also recommended deletion of this Chapter.

Suggestion: We, therefore, suggest that Chapter XX-C of the Income-tax Act should altogether be deleted.