Real estate invt funds stand disappointed: BMR

Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

There have been really no significant changes specific to the real estate sector and no phenomenal incentive besides the five year tax sops for categories of hotels and hospitals, according to BMR Advisors.

 

The general changes include breather to avoid the cascading effect of Dividend Distribution Tax, rationalization of FBT and changes to due dates for tax filings. However, real estate investment funds which were hoping to find place in the tax provisions, stand disappointed.    

 

• The provisions relating to levy of Dividend Distribution Tax ("DDT") have been amended to partially eliminate the cascading effect of DDT.  It is proposed that in computing the amount of dividend distributed by a holding company, the amount of dividend received by it from its subsidiary would be reduced, as long as the subsidiary company has paid DDT. The benefit of this set off is available only once and will not apply in case of a chain of more than one subsidiary company.  For the purpose of the section, a company shall be a subsidiary of another company, if such other company holds more than half in nominal value of the equity share capital of the company.

 

• This amendment would be welcomed by all real estate companies, since most real estate developers operate through multiple SPVs under the flagship companies. The proposed amendment would eliminate the cascading effect of DDT upto one level.

 

• With a view to promoting tourism and to attract tourists to certain World Heritage Sites in India, it is proposed to provide a tax holiday to new two-star, three-star or four-star category hotels located in specified districts having a World Heritage Site. These hotels should commence operations anytime between April 1, 2008 and March 31, 2013.

 

• A new section is proposed to be inserted to provide a tax holiday for five years for new hospitals set up between April 1, 2008 and March 31, 2013.  The hospital should have a minimum of 100 beds and can be anywhere in India, other than certain specified cities. 
• Contrary to expectations, no tax provisions for Real Estate Investment Trusts (REITs) have been introduced. 

 

• The due date for filing the return of income and Fringe Benefit Tax ("FBT") returns have been advanced to September 30 immediately following the end of the financial year, from the existing date of October 31. 

 

• The provisions of Minimum Alternate Tax have been amended to provide that the book profit shall be increased by the amount of deferred tax and DDT, if debited to the profit and loss account.

 

• The provisions relating to levy of FBT have been rationalized by excluding expenses on maintenance of guest house and a crèche in the office from the levy of FBT. 

 

• The Budget also contains certain proposals to amend procedural matters relating to intimation, issue of notice for assessments, etc.