Post by ionia on Mar 17, 2011 14:55:00 GMT 7
The Central Board of Direct Taxes (CBDT) has allowed many tax concessions and incentives to financing institutions lending money for housing development. The concessions are available mostly to private owned but autonomous financing institutions, The aforesaid incentives to the depositor/borrower of Housing Finance Corporation (HFC) are available only if the company has been formed with the main objective of carrying on the business of long-term finance for construction or purchase of houses for residential purposes and is approved by the Ministry of Finance under Section 36(1) (viii) of the Income Tax Act.
The procedure involved in obtaining approval from the Central Board of Direct Taxes (CBDT), Department of Revenue and the Ministry of Finance is however tortuous and time-consuming. In the first place the perception of the CBDT is quite different from that of the Ministry of Urban Development, which is the nodal Ministry for housing development. The CBDT is more concerned with safeguarding the revenues of the government, than in encouraging housing development. Due to the high cost involved in developing Real Estate Cochin City’s leading builders now take different routes to avail finance, than to get embroiled in the various government rules and regulations.
If the HFC has the provision of long term finance for construction/purchase of houses for residential purposes it is not clearly spelt out in its Memorandum or if the company has multiple objectives connected with the financing of residential houses and related infrastructures, its eligibility for approval under section 36(1) 9(viii) of the Income Tax Act is suspect. Even if the Memorandum of the company is amended by a special resolution in the general meeting of its shareholders, CBDT does not grant the necessary approval till the Company Law Board approves the amendment.
The procedure involved in obtaining approval from the Central Board of Direct Taxes (CBDT), Department of Revenue and the Ministry of Finance is however tortuous and time-consuming. In the first place the perception of the CBDT is quite different from that of the Ministry of Urban Development, which is the nodal Ministry for housing development. The CBDT is more concerned with safeguarding the revenues of the government, than in encouraging housing development. Due to the high cost involved in developing Real Estate Cochin City’s leading builders now take different routes to avail finance, than to get embroiled in the various government rules and regulations.
If the HFC has the provision of long term finance for construction/purchase of houses for residential purposes it is not clearly spelt out in its Memorandum or if the company has multiple objectives connected with the financing of residential houses and related infrastructures, its eligibility for approval under section 36(1) 9(viii) of the Income Tax Act is suspect. Even if the Memorandum of the company is amended by a special resolution in the general meeting of its shareholders, CBDT does not grant the necessary approval till the Company Law Board approves the amendment.