Currently DTC a.k.a Direct Tax Code is in the news. It is set to alter all aspects of our finances. One of the aspects that will be affected will be your personal income. Here we take a look at how DTC will affect real estate income.
Short-term capital gains: Under the new tax code, any profit or loss incurred on the sale of a asset will be taxed. The tax you’ll have to pay will be as per your income tax slab. Currently sale of an asset within 3 years is called as short term.
Long-term capital gains: If the asset is sold after a year, any loss or profit made is liable to attract long term capital gains tax. However now instead of indexation benefit, there will be a new of discounting, which will be used to compute LTCG. Also the new base rate for fixing the cost of acquisition will be April 1, 2000. This will help you if you have invested in real estate between April 1981 and April 2000, as you won’t have to pay any tax. Moreover instead of paying tax on capital gains at a flat rate of 20% post indexation, now they will be added to your income post indexation and you will have to pay tax as per your tax bracket. This is bad news for you if you fall in the higher tax bracket of 30%.
Taxation on rental income: The previous draft of DTC had recommended the gross rent at an estimated rate of 6% of higher of either the market value or the cost of construction or acquisition. But now it will be the actual rent received or receivable for the fiscal. This will help you if you are renting out your home.
Interest on home loans: As per the original version of DTC, tax deduction on interest paid on home loans was eliminated. But under the new DTC, you can avail of tax deduction on the interest paid on home loans up to Rs 150,000 for purchase or development of your home. This will help if you are a new home buyer.
Property not rented: It won’t fetch any tax benefit.
To know more about how the new DTC will impact your finances, get your financial planning done. For a right guidance, you can contact us at questa.mumbai@gmail.com
