Finmin may withdraw the 30 percent rebate on the total rental value of unoccupied properties.

As part of its plan to cut back on tax exemptions, the finance ministry may withdraw the 30 percent rebate available on the total rental value of unoccupied properties in the forthcoming Union Budget.

At present, if a house owner keeps his property vacant (does not rent it out partially or fully), he can claim a tax rebate equivalent to 30 percent of the rental value of that property from his annual taxable income. In effect, if the annual rental value of a three-bedroom house is Rs 3 lakh, the owner of the vacant property can claim a deduction of Rs 90,000 from his annual taxable income.

Official sources say the Ministry of Housing and Poverty Alleviation has recommended the change for the 11th Five-Year Plan period that begins in 2007-08. Such a move will have a two-fold impact.

According to Vinoy Krishna, principal consultant, PricewaterhouseCoopers, it would increase the housing stock in the market, since owners would be encouraged to rent out their properties. Second, greater availability might decrease rental rates.

At the same time there are contrary views to the above. Spiralling capital growth of realty will make it uneconomical for property owners to rent homes at lower rates.

But be prepared for some drastic tax exemptions withdrawls in years to come

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Ram
Pinnacle Realty
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