In one of the article Published in Sakal Property on Saturday 24th July 2010, it is mentioned that there is not Income Tax for Promoters & Builders since last 5 years. This policy is to promote the RE secotr as per the author of that article. Is it really true? I was shocked to read this.

If it's true then it's ironic. One one side poor buyer is paying all sort of taxes right Stamp Duty, Registration, VAT, now Sales Tax and on top of that he pays Income Tax. But builders who are ripping profits like anything are not entitled to Income Tax? Is this sanity? Is govt not biased towards builder lobby?

Jitu_Sir,

Could you please clarify this?
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  • Hi Savvy, sounds like one of the dubious schemes launched by builders - 12% guaranteed return on investment of 25 Lakh - then you never see your money or even your 12% ever again !!!!!
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  • what if it's not dubious at all and you get to share proportionate profits (proportionate to your investment)?

    what if everyone involved is highly reputable locally and internationally?

    Example:

    Project Cost: 100
    Project Sold: 300
    Project Profit: 200

    If investor puts in 10 investor gets back roughly 30

    What if? Thoughts?
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  • Builder earns huge profit by being crook.
    How do you ensure the builder is enough crook to build a huge profit but least crook when its time to pay back your share ? This is a dilemma.

    The same example you gave, will look like this,

    Project Cost: Actual: 100 On Paper: 200
    Project Sold: Actual: 300 On paper: 205
    Project Profit: Actual : 200 On paper: 05

    Isn't this same thing happening with RE stocks like DLF, Unitech ?

    Originally Posted by savvy_investor
    what if it's not dubious at all and you get to share proportionate profits (proportionate to your investment)?

    what if everyone involved is highly reputable locally and internationally?

    Example:

    Project Cost: 100
    Project Sold: 300
    Project Profit: 200

    If investor puts in 10 investor gets back roughly 30

    What if? Thoughts?
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  • Great point.

    What if this concern was addressed and controls were built in to ensure cost and profits are not staged?

    What if the investor has rights and representation and is kept completely informed at every step of the way?

    What if?
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  • Originally Posted by realacres
    Yes, it is true & the builders have been given this provision under 80IB. Under this, all flats less than 1500 sq ft sold by the builder will be free from any income tax. The point is the possession should be given before Mar 2011. This is the sole reason why many builders prefered white money as it was tax free.

    The intention of the govt (just to fool public) was this NO INCOME TAX to the builder would translate into affordable housing to masses as builders will pass on this benefit to the buyers. However, builders as usual, didn't pass on this benefit making govt poorer, & builder richer at the cost of govt!! It is the mango man who buys houses here suffers the most:bab (45):. He pays to bank, builder & govt :(. So, loot the govt man, avoid paying taxes honestly:).


    Slightly out of context (my apology for this ).
    IF this is the case ( benefit only for the units getting poss by MAr 2011 ), then their will be lot many builders trying to build the flats and give possession by Mar2011 to rip the benefit of this exemption.
    This scenario is equivalent to Tata Motors building huge inventory before March end to complete the yearly target. In April, the dealers are flooded with vehicles, excess supply, less demand.
    Will this scenario possible in RE ? Then, do we have chance of getting flats in bargained price in Feb and Mar 2011 ?
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  • Good info from this thread. So maybe all buyers can wait another 6 month to see the magic of ready possessions flat..... No wonder if there is huuuuuuuuuuge availability with maximum options and builder would try to sell their flat's before March 2011... so its time to count....... Isn't it?
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  • Originally Posted by HemantDesh
    Slightly out of context (my apology for this ).
    IF this is the case ( benefit only for the units getting poss by MAr 2011 ), then their will be lot many builders trying to build the flats and give possession by Mar2011 to rip the benefit of this exemption.

    Will this scenario possible in RE ? Then, do we have chance of getting flats in bargained price in Feb and Mar 2011 ?

    Dear HemantDesh,
    The condition is to get completion prior to 31st March 2011 and independent on number of actual flats sold. In other words there could be few unsold flats in the said project.
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  • Anyways, completion certificate has nothing to with sales.
    So going forward, will builders have to pay income tax on their new projects?

    There goes my chance of switching profession from to builder ...
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  • Facts about 80IB

    Originally Posted by abeerbagul
    Anyways, completion certificate has nothing to with sales.
    So going forward, will builders have to pay income tax on their new projects?

    There goes my chance of switching profession from to builder ...

    All the projects sanctioned after Mar 08 (earlier it was Mar 07) will not be eligible for this schemes as it has now been scrapped.

    To cut long story short, the builders were eligible for NO Income Tax only if they met the following criterion:-

    1. The project has to be sanctioned between Mar 03 to Mar 08,
    2. The area of the flat in Pune has to be less than 1500 sq ft,
    3. The possession should be before Mar 11,
    4. No 2 flats can be sold in the same family under this schemes. So, a father & son can't buy in the same project, let alone someone who wants to buy multiple flats in his/her own name!!

    Henceforth, the builders will have to pay income tax for all projects sanctioned post Mar 08 as well as those which get completed after Mar 11 (even if the project is sanctioned before Mar 08 under this scheme):bab (34):.
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