Withdrawal of benefit on Home Loan

Direct taxes code, which will replace the Act, the hyped up one:

1.seeks to remove the allowance of interest on self occuppied property IN ITS ENTIRETY. DUMB.

2.Also proposed to take 6% of municipal valuation/construction cost as Fair rent. VERY CLEVER.

And we think the FM was being fair when he "raised the slabs to reflect realistic income levels". He just eyewashed the media.

Sir ,

I dont understand how 6% of construction cost , if muncipal valuation is not available ( in DTC ) is clever ? Suppose my construction cost in 1980 was one lakh and the property is valued at above over a crore now , just 6000 would be considered as fair rent .

How is that sustainable ?

Its nothing but presumptive taxation 6% of municpal valuation is also on the higher side , it generally never exceeds 3-4% , if these provisions are actually implemented , rental rates will rise across the board . 

The above provision has the potential to increase rentals across the board. In the current environment, property yields are in the range of 3-4% if not lower. Take the case of a tenant who is paying a rent of Rs 25,000 per month on a property that costs say, Rs 1 crore. Rs 25,000 per month translates into an annual rent of Rs 3 lakh or 3% of the property cost.

Now, under the DTC, irrespective of the fact that the landlord is receiving Rs 3 lakh as rent, he will have to pay tax as if he is receiving Rs 6 lakh (6% of Rs 1 crore). So he may as well start charging Rs 6 lakh as rent. If not, the least he would do is to pass on the burden of the extra tax to the tenant

Rajeev, i was being sarcastic about the second point. Its cruel to take the higher of 6% MV of if MV is not available then 6% of construction cost

With a view to simplifying the determination of the taxable income and eliminating

any scope for litigation, the Code will have a new scheme for computation of income from

house property. The salient features of the new scheme will be as follows:-

(a) Income from house property shall be the gross rent less specified deductions.

(b) Gross rent will be the higher of (i) the amount of contractual rent for the

financial year; and (ii) the presumptive rent calculated at six per cent per

annum of the ratable value fixed by the local authority. However, in a case

where no ratable value has been fixed, six per cent shall be calculated with

reference to the cost of construction or acquisition of the property. If the

property is acquired during the financial year, the presumptive rent shall be

calculated for the proportionate period of that financial year.

Its not logical at all. What has he foreseen if the construction cost cannot be determined as well?

The FM's only objective was to do away with most of the exemptions available to the assessee, and he calls it rationalising the tax structure. Its irrational.

Iam normally congress fan, but his idea to introduce MAT on gross assets is stupid. He says P&L Debit balance will be part of gross assets! Arey Wah! Ustad Nikla. And tax on imputed incomes? Wah!

I think at the end of his tenure, he will realise that there is too much oversight, introduce the same old provisos and explanation and take us back to the drawing board.

The new code is dead against individuals in general and salaried class in particular.

yup i agree totally , i think it may not be implemented once the election is done . the final code will definitely be a hell lot different from the draft .