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Budget 2020 income tax expectations: How Section 80C limits, tax rates & surcharge have changed in 10 years

Budget 2020: With the changes in surcharge rate in FY 2019-20, India entered in the league of countries with high tax rates.

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Budget 2020: With the changes in surcharge rate in FY 2019-20, India entered in the league of countries with high tax rates.

In the last Union Budget, the Hon’ble Finance Minister increased the rebate to INR 12,500; thereby resulting in taxpayers having income upto INR 500,000 not paying any taxes. On the other hand, the tax rates for super rich taxpayers saw a steep increase from a maximum marginal rate of 35.88% to 42.744% (total income above INR 5 Crores) because of increase in surcharge rate from 15% to 37% (for taxpayers having total income between INR 2 to 5 Crores, surcharge rate was increased to 25%, resulting in maximum marginal rate of 39%).Related News

Watch: What is Union Budget of India

With the several measures taken by the Hon’ble Finance Minister during the Financial Year 2019-20, to boost the slowing economy and provide stimulus to industry, there are high hopes that there would be a change in personal tax rates and/or increase in chapter VIA deduction under section 80C of the Income tax Act, 1961. Before the Union Budget 2020 is presented, let’s look at the history of surcharge, tax rates and limits of section 80C deductions of past 10 Financial Years.

With a clear intention of taxing super rich, the Government has steadily over time increased the rate from 10% to 37% in FY 2019-20.

*For FY 2013-14 to 2016-17, surcharge was applicable for total income exceeding INR 1 Crore.

*For FY 2017-18 and 2018-19, surcharge at a rate of 10% was levied if total income exceeds INR 50 Lakhs. Surcharge at a rate of 15% was levied if total income exceeded INR 1 Crore.

*For FY 2019-20, surcharge at a rate of 10% was levied if total income exceeds INR 50 Lakhs.

Surcharge at a rate of 15% or 25% or 37% was levied if total income exceeded INR 1 Crore or INR 2 Crores or INR 5 Crores respectively.

With the changes in surcharge rate in FY 2019-20, India entered in the league of countries with high tax rates. Below table shows how the tax rates for individuals has increased over the last decade:

*Note: The said table depicts the highest tax for the individual tax payers (earning total income more than INR 5 Crores) other than women, senior citizen for the FY 2009-10 to FY 2019-20, as applicable.

The tax rates include surcharge and education cess as applicable for the said FY. The last decade has seen increase in cost of living, while the Chapter VIA deduction under section 80C has not kept pace with such increase in living. Below is a summary of section 80C limits for the past decade:

*Note – the above does not include other deductions available under Chapter VIA viz., premium paid for medical insurance, additional deduction for contributions to National Pension System, etc.

Like always, we all wait in hopes and expectations of some tax breaks on personal tax side. However, the decision to cut any taxes may be challenging considering the state of economy, recent corporate tax cuts and fiscal roam available to the dispensation.

(Aditya Modani is Tax Director, People Advisory Services at EY and Chintan Mehta is senior tax professional at EY. Views expressed are personal.)

Credits: Aditya Modani and Chintan Mehta – Financial Express

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Commercial Property

Commercial Office Space Sector Takes Pole Position In Indian Real Estate

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The budget focused on boosting consumer demand, infrastructure development, rural income and manufacturing. Amidst economic gloom, Indian office real estate market performed exceedingly well as compared to other asset classes in this sector during 2019. 

The office market has witnessed multiple large ticket transactions and attracted a substantial amount of investments from various global institutional investors and sovereign wealth funds. In 2019, office assets when compared to residential assets offered high growth and stable returns. 

India’s office leasing proportion rose by 40% Y-O-Y, to an all-time high of 51.6 million sq. ft in 2019. 

 A joint venture between Allianz Group and Shapoorji Pallonji Group saw an acquisition of 2.3 million sq. ft IT SEZ for INR 1,800 crore in Hyderabad. Foreign real estate entities also put up a major show in the Indian real estate spectrum. Tokyo-based Sumitomo Corporation acquired a three-acre plot in the high-profile BKC area for a whopping INR 2,238 crore, where it plans to build an office complex, while the Blackstone Group, an American real estate private equity firm procured the ‘One BKC’ office building for INR 2,500 crore.

These stratospheric investments in the office real estate market speak volumes of the credibility of the Indian real estate sector even in its trying times. 

2019 was a landmark year for commercial real estate. India registered its first REIT in March 2019 when Embassy Office Parks REIT, a joint venture of Embassy and Blackstone Group raised around INR 4,750 crore, in office space with 33 million sq. ft portfolio. It became the largest REIT in Asia. 

India’s office market in 2020, started on a positive note too. DLF leased out around 2 lakh sq. ft office space to social media giant Facebook in Gurugram.

Office space market dynamics

Indices2016 (mn sq.ft)2017 (mn sq.ft)2018 (mn sq.ft)2019 (mn sq.ft)Y-o-Y Growth2019 (%)
Net Absorption33.528.733.246.540%
New Completion36.528.735.751.645%
Vacancy15.1%14%13.5%13%

Source: JLL Research 

Note – Top seven cities are included – Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata

Net absorption of office space across top seven cities grew at 40% Y-O-Y, reaching an all-time high of 46.5 million sq. ft in 2019. Almost 52 million sq. ft of Grade A office space was completed in the FY19, which is 45% growth over FY18. 

In the last half a decade, the office market has witnessed the lowest vacancy level at 13% in 2019. This robust growth in demand for office space is mainly led by IT/ITeS and co-working operators in cities with developed infrastructures. The current momentum in net absorption of office space is expected to continue in 2020, due to a foreseen recovery in economic activities.

The IT/ITeS sector accounted for 42% of total office space leased followed by co-working operators at 14% and subsequently followed by BFSI and Manufacturing/Industrial. Office space leased by co-working operators increased significantly from 8% in 2018 to 14% in 2019 among all sectors. Today there are more than 1,000 co-working spaces in India, making it is the second largest co-working market in the world. The demand for co-working spaces are not only driven by start-ups, but also by bigger enterprises and MSMEs.

City-wise net absorption of office space 

Source: JLL Research

In 2019, Hyderabad, Delhi-NCR and Bengaluru cumulatively witnessed around 70% of total net absorption of office space. Despite muted growth in Q4 2019, Hyderabad registered almost three times net absorption at 10.5 million sq. ft in 2019 against 2018. 

The thriving IT sector in Hyderabad was the main reason behind the surge in demand for office space. With net absorption standing at 10.8 million sq. ft in 2019, Delhi-NCR market took the crown as the leading city in average office space absorption since 2010. Mumbai, Bengaluru, Chennai, and Pune market witnessed decline in overall leasing activity in 2019 in the range of 2-12%.

Strong demand supported the high rental growth prospect in Hyderabad, Bengaluru, Delhi-NCR, and Pune. These cities registered an average rental yield of 5%. The demand for Grade A office space is high in Mumbai but availability is low. This shortage of office space has shot the average rent upwards. Investors are showing great interest in premium office space in Bengaluru and Hyderabad and these markets are also witnessing strong pre-commitment. 

The commercial office sector in India is in a good space, even in a still-recovering real estate market. Flexible work patterns, improved work productivity and cost effectiveness have fuelled the co-working business. 

It is expected that by 2025, around 42% of the Indian population will work in urban centres, and hence the demand for office space will shoot up. This development augers well for the real estate market which is witnessing a paradigm shift in the office space market. 

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Commercial Property

Puravankara Ltd has reported a 41 percent decline in its consolidated net profit

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During the April-December 2019 period, the realty firm’s net profit increased to Rs 88 crore as against Rs 75.57 crore a year ago.

Realty firm Puravankara Ltd has reported a 41 per cent decline in its consolidated net profit at Rs 16.10 crore for the quarter ended December. Its net profit had stood at Rs 27.18 crore in the year-ago period. 

The company’s total income also fell to Rs 528.11 crore in the third quarter of the current financial year from Rs 565.66 crore in the corresponding period of the previous year, the Bengaluru-based firm said in a regulatory filing. 

During the April-December 2019 period, the realty firm’s net profit increased to Rs 88 crore as against Rs 75.57 crore a year ago. 

Total income in the first nine months of 2019-20 rose to Rs 1,797.47 crore from Rs 1,459.64 crore in the corresponding period of the previous year.

Source: PTI – Realitynxt

(Note: The story has been published without modifications to the text. Only the headline and intro have been changed.)

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Commercial Property

Godrej Properties will acquire 26.58 acres land in New Delhi from the Railway Land Development Authority

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The land parcel will be purchased from the Railway Land Development Authority and is situated in the city’s Ashok Vihar area.

Godrej Properties Ltd on Monday said it will acquire 26.58 acres of prime property in the national capital for  ₹1,359 crores.

Terming it one of the largest land transactions in recent past, the Mumbai-based real estate developer said the acquisition value of  ₹1,359 crore will be paid in instalments over several years as stipulated in the tender documents.

The land parcel will be purchased from the Railway Land Development Authority and is situated in the city’s Ashok Vihar area.

“Spread over 26.58 acres, this development will offer about 3 lakh square meters (3.28 million sq. ft.) of development potential and will be developed as a luxury group housing project. The site is surrounded by parks on three sides offering stunning park and city views,” the company said in a statement. 

“We believe this project in central Delhi is one of the most exciting projects in our development portfolio and will contribute significantly to the growth of our business in NCR. We will seek to ensure a landmark project that delivers an outstanding lifestyle for its residents,” said Pirojsha Godrej, executive chairman Godrej Properties, said.

This is the company’s second project in Delhi after the launch of Godrej South Estate in Okhla in 2019. Godrej Properties has developed many residential projects in other parts of the national capital region, including Gurgaon and Noida.

At 0943am, shares of Godrej Properties were down 0.5% at ₹1,135 rupees on the BSE.

Source: LiveMint

(Note: The story has been published without modifications to the text. Only the headline and intro have been changed.)

Credits: Realitynxt

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