TAX INCENTIVES FOR PROMOTION OF HOUSING

Liberalisation of tax holiday to approved housing projects

Under section 80-1A of the Income-tax Act, profits of approved housing projects where the development and construction commences on or after 1.10.1998 and is completed by 31.3.2001, are fully deductible. The conditions necessary for claiming the benefit are that the approved housing project should be on minimum area of one acre and should have dwelling units with a maximum built up area of 1000 sq. ft.

It is proposed to modify the existing benefits to provide that a areas other than falling in and within 25 kms. from the municipal limits of Delhi and Mumbai, the built up area of dwelling units may be upto a maximum limit of 1500 sq. ft. instead of 1000 sq.ft. at present to make them cntitled for the benefit. The built up area for areas falling in Delhi and Mumbai and within 25 kms. of the municipal limits of both, however, shall remain the same.

The proposed amendment will take effect from 1st April, 2000 and will, accordingly apply in relation to the assessment year 2000-2001 and subsequent years.

Enhancement of deduction of interest allowable on borrowed capital in respect of self-occupied residential house

The deduction of interest on account of borrowed capital invested in the acquisition or construction of a house is prescribed in the proviso to sub-section (2) of section 24 in regard to self-occupied residential houses. The ceiling of deduction presently stands at Rs. 30,000. To give a boost to the house building activity and encourage construction of more residential units to meet the increasing housing needs, it is proposed to enhance the deduction of interest available at present. If the loan has been taken for construction or acquiring a residential unit on or after 1.4.99 and the construction of more residential units to meet the increasing housing needs, It is proposed to enhance the deduction of interest available at present. If the loan has been taken for constructing or acquiring a residential unit on or after 1.4.99 and the construction of the residential unit out of such loan has been completed before 01.4.2001, the deduction on account of interest on such loans can be availed up to a limit of Rs. 75,000.

The amendment will take effect from 1st day of April, 2000 and will accordingly apply to assessment year 2000-2001 and subsequent years.

Extension of provision of section 43D to Housing Finance Companies

Under the existing provisions of section 43D, income by way of interest in relation to the bad and doubtful debts of a public financial institution or a scheduled bank or a state financial corporation or a state industrial investment corporation is chargeable to tax in the previous year in which it is credited to the profit and loss account or, as the case may be, in which it is actually received, whichever is earlier. With a view to improving the viability of the Housing Finance companies, and to provide a boost to the housing sector the Bill proposes to extend the above provisions to such companies registered with National Housing Bank.

The proposed amendment will take effect from 1st April, 2000 and will, accordingly, apply in relation to assessment year 2000-2001 and subsequent years.