IF you're planning to buy two adjacent houses to make your home bigger, there's a problem the builder won't sell you two flats within the same complex any more
IF you're planning to buy two adjacent houses to make your home bigger, there's a problem the builder won't sell you two flats within the same complex any more. After the Budget, there has been a change in the 80-IB(10) section of the Income Tax Act a builder who applies for full tax exemption on his profits cannot sell two flats in one complex to the same person or to people belonging to the same family.
Earlier, if a builder had a project of not less than an acre, made houses not bigger than 1,000 sq ft within Mumbai and its 25 kilometers periphery, and didn't have more than 2,000 sq ft of commercial space, he could apply for full tax exemption on his profits. According to tax expert Vimal Punamiya, the government had brought in this rule so that builders could make affordable houses. But many buyers would merge two flats into one big house. This meant the builder got incentives and would finish the project soon.
This rule comes into retrospective affect since April 1, 2009, under this rule, a builder has to complete his project within four years. If he doesn't take the exemption under the scheme, he will have to pay a tax of 33 per cent on his profit, added Punamiya.
An expert said, "Which builder wants to lose money? They will register a flat in someone else's name first and later transfer it to the original buyer." But as another expert pointed out, "When it comes to money, no one trusts even close relatives."
On Friday evening, builders under the Maharashtra Chamber of Housing Industry met to discuss the Budget. The main issue raised was section 80-IB(10). However, when asked, most said it would only affect the affordable segment. "This scheme is mostly meant for the affordable housing segment. They will be affected," said Dharmesh Jain of Nirmal Lifestyle.
However, according to the experts, almost every builder is irritated with this rule as it comes into retrospective effect, which means those builders who have sold more than one flat to the same people or to people from the same family, won't get tax benefits.
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