Page 24 - Forbes - India (January 2020)

ExpEctationS and Structural rEformS
Pre-Budget S P ecial

to the GDP. Unless volumes and boost individual savings or spending,
pricing for these lenders improve, a Uptick in Real Estate both of which, in appropriate doses,
lot more NBFCs could be in deeper New launches Total absorption are salutary to our economy.”
Months taken to sell unsold inventory (RHS)
trouble. “The government needs 550,000 50 A couple of other areas experts
to create positive sentiment in the 440,000 40 believe Sitharaman should look at are
real estate, farming and MSME Number of units 330,000 30 the dividend distribution tax (DDT)
lending segments. While some 220,000 20 Months and long-term capital gains tax.
steps have been taken, more is 110,000 10 Dividends below a total of `10
possible,” says Edelweiss’s Jain. 0 0 lakh in a financial year are exempted
There are signs of an uptick in CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 H1CY19* from income tax for all shareholders.
sales for real estate across sectors. But they are taxed for shareholders
Data from the top eight cities in Source edelweiss Securities, Prop equity; *Trailing 12 months who reside overseas. The committee
India reveals that unsold inventory It is understood that the committee to frame the new DTC is believed to
has fallen from 802,535 units in 2018 to frame the new Direct Taxes Code have suggested a change in the way
to 758,756 units in 2019 (see box). (DTC) has suggested a rehaul of the dividends are treated for tax purposes
Demand has risen to 292,519 units personal income tax slab rates with and a comprehensive package of
from 281,308 units in the same period. a rate of 5 percent for incomes of measures has been recommended.
Experts anticipate more sops to `2.5 lakh to `5 lakh, 10 percent for “If corporate tax reforms in the form
revive the sector. The hope is that those earning between `5 lakh and of abolishing DDT and reverting
there is an increase in the deduction `10 lakh, 20 percent for `10 lakh to to the classical system of dividends
of interest of housing loan for self- `20 lakh, 30 percent from `20 lakh taxation are introduced, they will
occupied property. “Currently there to `2 crore and 35 percent for those give a hugely positive signal to
is a deduction of only `2 lakh on with incomes above `2 crore. overseas investors,” says Gajaria.
interest paid on a housing loan under Currently individuals under the
Section 24. A hike in this limit will age of 60 and with income between fiscal deficit woes
24 spur housing demand,” says Sharad `5 lakh and `10 lakh are taxed at Last year, Sitharaman had set a fiscal
Mittal, CEO of Motilal Oswal Real `12,400 plus 20 percent tax while deficit target of 3.3 percent for the
Estate Funds. [The deduction limit those earning above `10 lakh are current financial year. HDFC Bank’s
is `3.5 lakh on an affordable housing taxed `112,500 plus 30 percent tax. chief economist Abheek Barua
loan for a first-time home buyer.] “It will be interesting to see if these says it is likely India will miss the
To ease liquidity in the sector, recommendations are implemented,” deficit target and it would, in fact,
Mittal says there needs to be a more says Hitesh Gajaria, partner and head widen. The finance minister met
direct approach to resolve the crisis. (tax) at KPMG in India. “The 2019 economists from most top banks and
“The government should look at surcharge rate placed taxes for the financial services firms in December
a one-time restricting of loans by super-high incomes earned at over to understand and discuss the
the NBFCs. This will allow them to 42 percent, but if the basic threshold pain points in India’s economy.
surpass the current slump in real level and large portion of middle class The economists had told her that
estate and focus on acquiring assets are given relief in the form of enlarged it was inevitable that a fiscal slippage
rather than focusing on generating slabs, it might help by putting more would take place and the government
liquidity,” explains Mittal. cash in their hands. This might would need to consider increasing
spending to revive growth. Barua,
More tax relief who was part of the meeting, forecasts
In each budget, every incumbent “What might get India’s fiscal deficit target to touch
finance minister is judged depending traction thiS year iS around 3.8 percent this fiscal. “We
on the relief provided to personal might have some kind of explanation
taxes. For a government that has the aSSet monetiSation for the slippage and then we will
unabashedly declared itself as pro- Programme, Which attempt to go back to the consolidation
poor, there could be more relief for path,” says Barua. “If we have to look
individual taxpayers. Economists and had Been on the Back at things cynically, it will be a Budget
corporate heads Forbes India spoke Burner.” which will tend to rankle and we will
to are confident that Sitharaman have to wait for the year to pan out.
might provide relief for the lowest abheek barua, chief economist, What might get traction this year is the
bracket (starting `2.5 lakh income) hdFc bank asset monetisation programme, which
of the individual taxpayer. had been on the back burner.”

forbes india • january 31, 2020