|
|
|
| REAL ESTATE |
|
|
|
Downhill march
Tale of two IT cities
TAX TIPS
Gifting compensation amount
Deduction on self-occupied house
Expenditure on repairs
Circle rate and CG computation
Tax on insurance claim
GREEN HOUSE
Fortnightly Alert
|
|
|
|
Downhill march
Despite visible signs of recovery in economy, the slowdown in the housing sector continues in Himachal Pradesh. The private colonisers who descended on the hill state in hordes following the opening of the sector are now a disappointed lot. The poor demand for houses in and around the industrial area of Baddi — where most of the licenses for construction of new colonies were granted — has dampened their spirits.
The mad rush for registration under the Apartments and Property Regulation Act is over. The Himachal Urban Development Authority (HIMUDA), which is the nodal agency under the Act, registered 238 companies in all. However, over the past four years only 17 companies have been registered. Further, licences for construction of over 10,000 flats have been granted but only about 4,000 units have come up or are nearing completion. The number of flats that have actually been sold is much less. The colonisers have curtailed their plans of constructing high-end apartments and slowed down the pace of work on the ongoing projects. Only four new licences have been given over the past one year, out of which one for the construction of 80 flats has been given near Shimla.
Apart from Baddi, where almost 90 per cent of the projects are coming up, one licence each has been given in Kulu, Kasuali, Palampur, Dalhousie and Shimla. Chief executive officer of the HIMUDA, S.C. Sood admitted that euphoria of investors was over and hardly any companies were coming forward for registration. Even those who had already applied for registration were not pursuing their cases seriously for obvious reasons. Economic slowdown apart, the private sector housing projects had not evoked the desired response even during the industrial boom that the state witnessed in the wake of the Central package.
There are not many takers for flats despite huge demand for housing accommodation in the Baddi area. The reasons for this disinterest are not far to seek. With abject lack of basic infrastructure like good schools, hospitals, quality power supply, roads and other civic amenities, it is not the ideal place for living. To call it a township will be a travesty of facts; it could be better described as a huge industrial slum. As a result industrialists, executives and other well-paid staff is more keen on investing in Panchkula, Chandigarh , Mohali and the adjoining areas where better flats are available at almost the same prices. The low-paid workers cannot afford such costly property. Moreover, most of them come from far off areas in Bihar and Chhattisgarh, Jharkhand and Uttar Pradesh and as such are not very keen to own property in the area. The private builders erred by not catering to the needs of low-income group. This is evident from the fact that one-room houses constructed by the HIMUDA in Baddi, Nalagarh and Parwanoo have been sold out. The reason behind this is that these were reasonable priced with cost ranging from Rs 2.75 to 4.75 lakh. The uncertainty regarding the extension of industrial package beyond March 2010 has also been a factor in investor disinterest. There are enough indications that the Centre may extend the package at least up to 2013, though the state wants it to continue till 2020. The extension of package may help but only to an extent, providing basic infrastructure is more important. The builders will have to do some homework and come up with reasonably priced flats keeping in view the demand and paying capacity of the local people more so, because outsiders are debarred from acquiring property in the state without the prior permission of the government under the land reform and tenancy Act.
|
|
Tale of two IT cities
It is mixed sentiments for some players in the real estate industry as IT sector in Bangalore trundles back on purchase mode but Hyderabad displays a cautious sentiment owing to the current political situation.
"The IT customer is back on track", Sunil Mantri, Chairman of the Sunil Mantri Group, a leading real estate firm in the IT city, said.
"The IT employee is back to buying properties", he said while stating that in its to be launched project on Sarjapur road, out of the 100 bookings 90 per cent were IT employees.
"An IT employee who was worried about his job and cuts in salary and had gone slow on purchasing decisions, is now back trying to purchase," he said. "The real estate sector is a very sensitive sector.
Investments in these sectors are long term and not easy to exit unlike fixed deposits and stocks that can be exited from easily. Hence IT employees, who were worried about losing jobs and rollback of packages, were not in the purchasing mood right from end of 2008 to September 2009. But post September the confidence has returned," he said. "The last four months have been good. We have seen a 40 per cent increase in purchase in the last four months. Out of which 50 per cent would be from the IT sector," said Swaroop, Senior Vice-President, Prestige. However, while the IT city of Bangalore has given the sector reasons to smile, Hyderabad was a cause for worry. "We are going slow in Hyderabad on our projects," Sunil said as buyers were cautious and the mood not too upbeat. The group has four projects with 5,000 units planned till 2014-15 has decided to roll out these projects "in phases". "We are cautious in Hyderabad," he said. Hyderabad, which was one of the hottest markets till last year, had gone on a slowdown track after theTelanganna issue. "We are looking at a turn around and things looking up from 2010," says a managing director of Jones Lang La Salle Meghraj, a global real estate service firm. "IT employees are beginning to look at purchasing and enquiries have been coming and sale taking place in Bangalore," he said. However, properties that were exclusively developed for IT/ITES sector like luxury apartments were no longer happening as before. "In Hyderabad, there had been an oversupply and until these are absorbed, we do not expect any fresh projects," he said. Moroever, Hyderabad had been hit harder than Bangalore during the recession as it was more IT/ITES dependant. "IT-ITES was its only USP", but "In Bangalore, IT was not the only market driver for the real estate sector". —
PTI
|
|
TAX TIPS
Q. I have two houses. The one purchased earlier is being used for self-occupation and the later one, which has been acquired in April 2009, has been let out. These were purchased out of my own funds as well as borrowing from bank. I have duly informed my office regarding the acquisition of these two houses. On going through the computation of deduction of Income-tax at source I have observed that interest being paid on the loan borrowed for the second house has not been taken into account. The deduction in respect of self-occupied house has been allowed to the extent of Rs1,50,000. Am I not entitled to deduction in connection with the borrowing for the second house?
— A.K. Walia A. The deduction of interest against the income from a self occupied residential house is limited to Rs 1,50,000 in respect of one house. The second property having been let out, the entire amount of interest payable is allowable against such income. However, for deduction of tax at such purposes, the interest payment in respect of second property would not be considered. Your office has, therefore, taken the correct decision. You can, however, send the particulars of income from house property in Form 2B to your office and thereupon the office will take into account such income for the purposes of making the deduction of tax at source.
Q. Agricultural land owned by my brother was compulsory acquired by the Punjab Government for public purpose. The land was not the ancestral property of my brother rather it was self-acquired property. In 2007, my brother got enhanced compensation amount of Rs 30 lakh from the Court. Now he wants to gift the entire amount to me with the consent of his family members i.e. wife, son and daughters. So kindly advise me:
Whether my brother can gift me the above said amount of compensation. Whether any written document is required before I accept the gift amount. What would be my tax liability if I accept the gifted money? — Jarnail Kaur A. It is presumed that the compensation received by your brother in respect of the compulsory acquisition of the agricultural land by the Punjab Government was not chargeable to tax. The reply to your query is therefore based on the said presumption. Your brother can gift the amount of Rs 30 lakh to you as the same being exempt from tax can be utilised in any manner he likes. It would be advisable to execute a Gift Deed, which should be witnessed by your brother’s wife, his son and daughters. Normally it is not essential to execute a gift deed in respect of a movable property, but in the case cited in the query, it would be advisable to do so. The amount of gift received from your brother would not be chargeable to tax in your hands as the same is exempt under Section 56 of the Act, being a gift received from a ‘relative’.
Deduction on self-occupied house
Q. I own a flat in Delhi that is self-occupied. My parents are also living in the said house. I have another flat in Chandigarh where I am working. The flat in Chandigarh has been financed partly by bank loan. The total interest paid on the loan for Chandigarh flat is about Rs 2.5 lakh. Am I entitled to the deduction of full amount of Rs 2.5 lakh against income from Chandigarh property?
— K.K. Gupta A. It is presumed that you are claiming exemption in respect of Delhi property under Section 23(2) of the Act on the contention that the same cannot be occupied by you owing to your employment at Chandigarh. The tax deduction of interest in case of Chandigarh property would be limited to Rs 1.5 lakh as against Rs 2.5 lakh paid by you. This is in view of the proviso to Section 24 of the Act. According to the said proviso deduction in case of a property that is self-occupied, the tax deduction shall not exceed Rs 1,50,000.
Expenditure on repairs
Q. A part of my building has been acquired compulsorily by the Municipal Authorities for the purposes of widening the road. The acquisition of such part has led to a substantial damage to the other part. The same requires to be repaired and a very large amount will have to be spent to carry out the repair work. The compensation received may not meet the expenditure of such repair. Is it possible to claim deduction in respect of such expenditure against the compensation so received?
— Rajan A. There is no provision in the Act that allows the deduction of expenditure to be incurred on the repairs to the portion of the building, which has not been acquired by any public authority. However, it may be possible to claim that (a) the amount spent for substantial repair of the building is an improvement to the existing structure and therefore the amount incurred on such substantial repairs of the building should be adjusted against the amount of compensation received and no tax should be payable in respect of the compensation so received, and (b) as and when the building is transferred, the original cost of the building and the amount of such expenditure on improvement (i.e. expenditure on substantial repairs less compensative) should be taken into account for the purposes of computing the amount of capital gain.
Circle rate and CG computation
Q. I am intending to sell my residential house situated in Hisar city and buy a residential flat in Faridabad. I am informed that for the purposes of computation of capital gain the circle rate will be taken as the rate for computing capital gain. Is the information so given to me correct?
— Prithpal A. Section 50C of the Act provides that where the consideration received or accruing as a result of the transfer on the capital gain being land or building or both is less than the value adopted or assessed by any authority of state government for the purposes of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of Section 48, deemed to be full value of consideration received or accruing as a result of such transfer. Therefore, the information given to you is correct and the capital gains on the sale of your house will have to be computed on the basis of the circle rate if any, notified by the state government in case the consideration received by you is less than the value adopted or assessed for the purposes of the payment of stamp duty.
Q. We are a partnership concern and are manufacturing packing boxes. The factory building and the machinery were completely destroyed in a fire that broke out on account of short circuit. Is the amount received from insurance company with regard to the destruction of these assets exigible to capital gains tax? I am advised that there has been some change in law, which brings such an amount to
taxability.
— Naval
A. In Vania Silk Mills Private Limited vs. CIT, the Supreme Court had held that insurance claim received on account of destruction of asset is not chargeable to tax, as the destruction does not amount to a transfer. The judgement has been nullified to some extent by introduction of a new sub section (1A) to Section 45 of the Act w.e.f. assessment year 2000-01. According to the said sub-section where a person receives during the previous year, any money or other assets under any insurance from an insurer and the compensation has been received because of damage or destruction of a capital asset and such damage and destruction is as a result of following categories of
circumstances: Flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or Riot or civil disturbance; or Accidental fire explosion; or Action by any enemy or action taken in combating an enemy (whether with or without a declaration of war). Then, any profit or gain arising from the receipt of such money shall be chargeable to Income-Tax under the head “capital gains”. The amount received from the insurance company shall be the deemed to be full value of consideration received or accruing as a result of the transfer of the asset. Accordingly in your case the amount received from the insurance company on account of destruction of factory building and the machinery will be treated as full value of consideration accruing as a result of the transfer of such capital asset. The amount received in excess of the written down value of such capital assets would be taxable as a short-term capital gain in view of the provisions of Section 50 of the Act.
|
|
Exotic treat
Satish Narula Strange is the world of plants and insects. However, whatever we know about plants and insects at present is not even a small part of what actually exists in Nature. Every year on the occasion of flower festivals one comes across new species. There is wealth of species hiding in the wilds.
It is very interesting to study these species and their distinct features. The accompanying picture is that of Bromeliad that grows wild in the rainforests. It grows on tree trunks and branches mostly in crotches. The plant does not need soil base and grows by spreading its roots on the tree trunks and drawing nutrition from above. There is a wide range of such plants with different kinds of foliage. In their natural habitat their behaviour is a little different than what we see in our conditions. Even the foliage colour and pattern changes when planted in our climate. The accompanying picture shows deep colouration in the middle of the plant. Till a few months back it was completely green with a yellow stripe but after it was kept at a place where it received a few hours of sunlight, it gave colour. In its natural habitat, it normally grows in conditions where the plant may not get even a glimpse of the sun. The leaves appear in whorls and form a cup in the middle. The cup gets filled with water that keeps the plant going. However, when grown in home gardens, it becomes essential to keep this cup filled and it is more important than even giving water in the roots. Interestingly, in the rainforests this cup filled with rainwater was used by travelers to quench their thirst and also one of the frog species uses this ‘pool’ to lay eggs. The plant also bears flowers. These appear as a bunch of small broccoli like buds that open to give mostly blue, red or yellow blooms and the plant dies after blooming. But just before blooming, there appears another baby plant at the base of the grown up whorl. As the parent plant starts withering after blooming, the baby plant takes over fast growth to keep the circle going. The beauty of these kinds of plants is that they adapt to terrestrial existence too and that character is used by the gardeners to grow them in pots with soil-manure mixture. These kinds of plants make excellent pot plants and can be placed on upper floors or even rooftops provided they are kept in shade of group of plants. Do not get surprised to know that the pineapple plant also belongs to this class. There is ornamental pineapple, too. There is no difference between the leaves except that these are variegated. The length of the leaves may go to a meter or beyond. The thorns at the edge of the leaves are deadly. The plant can be propagated from suckers or even the slips removed from the head of the fruit along with the bunch of foliage. This column appears fortnightly. The writer is a senior horticulturist at PAU and can be reached at satishnarula@yahoo.co.in
|
Lack of proper civic amenities and infrastructure has hit the sale of flats in industrial areas in Himachal
Pradesh, writes Rakesh Lohumi
Bangalore IT sector is in purchase mode, but Hyderabad is cautious
Q. I have two houses. The one purchased earlier is being used for self-occupation and the later one, which has been acquired in April 2009, has been let out. These were purchased out of my own funds as well as borrowing from bank. I have duly informed my office regarding the acquisition of these two houses. On going through the computation of deduction of Income-tax at source I have observed that interest being paid on the loan borrowed for the second house has not been taken into account. The deduction in respect of self-occupied house has been allowed to the extent of Rs1,50,000. Am I not entitled to deduction in connection with the borrowing for the second house?
Q. Agricultural land owned by my brother was compulsory acquired by the Punjab Government for public purpose. The land was not the ancestral property of my brother rather it was self-acquired property. In 2007, my brother got enhanced compensation amount of Rs 30 lakh from the Court. Now he wants to gift the entire amount to me with the consent of his family members i.e. wife, son and daughters. So kindly advise me:
