While the income tax rebate for income under R5 lakh is not all it has been made out to be, this interim budget comes to the rescue of Mumbaikars u00e2u0080u0094 rich and poor u00e2u0080u0094 with relief on housing
The budget addresses Mumbai's dire housing crisis with relief for new buyers
First of all, a budget is all about numbers and who knows numbers better than a Chartered Accountant? This budget was presented by a CA (acting Finance Minister Piyush Goyal) and there was a deft choice of words when the tax rebate for R5 lakh income was presented. It may have misled some into thinking that one has 100 percent tax-free income up to R5 lakh, but that is not the case.
We must, of course, be aware that the elections are just a few months away and there was a âmarketing' dimension in the delivery of this budget. I would say it was honest, but cleverly worded, and the people have to be alive to the lingo, to avoid misreading it.
Rebate debate
If one has an income of Rs 7.5 lakh, and after certain deductions, you have a net income of R4.75 lakh, you will get the tax rebate. On the other hand, if you have an income of R7.76 lakh, and after the same deductions, your net income is R5.01 lakh [just R1,000 more than the tax bracket], you will not be entitled to the rebate.
The rebate announcement also raised the hopes of others with higher income, thinking that the acting Finance Minister (FM) would have something for them too, but it was not to be. There was no false claim but I see this as the FM bowling a Kuldeep Yadav Chinaman ball [cricket lingo for deceptive delivery]. It is up to the batsman to read it correctly.
Mumbai state of mind
The accent on Maharashtra, and with that Mumbai, should resonate with readers. He addressed I could say, a very Mumbai situation. A father has two sons who are living with him. He wants to buy a home for each of them so that they can live separately. He buys two homes, each for R1 crore. Till now, the buyer could avail of deductions for one home (under Section 54 of the Income Tax Act). He had to pay a tax of 29 percent on the other home. Now, he does not, as there is a deduction for first-time buyers on the second home too. In this way, you have a resolution of a typical Bambaiyya problem, where space is at a premium. There are, of course, limitations because of the Rs 2-crore limit, but it does seek to resolve a problem, has appeal and is practical.
During implementation, the accessing officer must have a mechanism to check that the âinvestor' has bought the property only once. He may have to rely on a declaration by the buyer. That needs to be ironed out, but I see this as a positive sign and affirmation of trust.
Truthful taxpayer
Coming to trust, I discern a clear sentiment that has been building up since the past three years regarding the evolution of taxpayers. The mood has changed from distrust or non-co-operation to one of the compliant taxpayers. The taxpayer is now not looked on as an âadversary' who seeks to be constantly evasive on tax. He is seen as a âpartner' or âcontributor' to a mutual national effort. In this way, the taxpayer has also been imbued with the belief that his taxes are going towards development.
Rent relief
The proposed tax exemption on notional rent income of a citizen's second self-occupied home is another huge, huge plus, and not just for the creamy layer. Currently, income tax on notional rent is payable if a citizen has more than one self-occupied house. Now, this has changed. This is, of course, a bonus for the creamy layer who may have two homes, with the second home empty for different finding a lessee. What it does most effectively though is bring relief to the middle and lower middle class, along with the working class. Our domestic help, for instance. Many of them hail from places outside the city. Working in Mumbai, they may buy a home on out-skirts or just outside city limits. Can we expect them to pay notional rent on their original home? Is this fair?
Housing hurrah
What is evident overall is that there have been several provisions for the housing sector. The subtle push will result in a jump in growth, as the steel, cement industry is ready to go all out. Mr. Finance Minister, the josh is high.
Mitil Chokshi is a chartered accountant and senior partner at Chokshi and Chokshi, Mumbai.
As told to Hemal Ashar
Catch up on all the latest Crime, National, International and Hatke news here. Also download the new mid-day Android and iOS apps to get latest updates
