Central Council of Direct Taxes has outlined a reasonably priced rental housing scheme for city migrant with primary civic and social infrastructure facilities.

Investments in rental housing for the lower-income classes would be exempted from tax on income from dividends, interest and long-term capital gains of the sovereign wealth funds and of the Abu Dhabi Investment Authority as well as pension funds. In addition to the infrastructure projects which can receive foreign investment by debt or equities, the Central Council of Direct Taxes added the affordable housing complex to that category.

The Board informed in a notification of August 28 that affordable rental housing Complex is part of a Harmonized Master List of Sub-Sections of Infrastructure by the inclusion of a new item in social and commercial infrastructure category and by a footnote identifying Affordable Rental Housing Complex Scheme.

Tax Exemption for Rental Housing Scheme

This move means that foreign investment companies can invest in rental projects in the country under social infrastructure sub-sectors directly or through mechanisms such as the Alternate Investment Funds (AIFs) or the Infrastructure Investment Trust (In-vITS). Taxes would be excluded from income under this group. The change is likely to boost India's affordable rental housing segment, which has been impacted by the COVID 19 pandemic.

The Board specified an affordable housing complex as a rental project for urban migrants only or poor or economically weaker sections, or a lower-income group for at least 25 years with civic infrastructures, such as water, sanitation, sewerage, road, electricity as well as required social and commercial infrastructure. The initial rent set by the local authority based on local surveys of the area in which the project is located.

At least 40 dwelling units of the double or single or similar units or a combination of all three, but not more than one-third of the total built-up area under double bedrooms units should be included in the project and also defined space size for each.

By: Shailaja K