NEW DELHI: The National Real Estate Development Council (Naredco) has pointed out a significant tax imbalance between corporations and individual taxpayers, urging the government to adjust income tax rates. The organization claims that individuals and partnerships engaged in business face substantially higher taxes compared to companies.
Niranjan Hiranandani, chairman of Naredco, emphasized that while corporations generally pay an effective tax rate around 25%, individuals in similar business roles may pay up to 40%, including surcharges and cesses. “If a company is taxed at 25%, why should an individual or partnership in the same field face a 40% tax?” he questioned, advocating for equal tax treatment to enhance compliance and investment confidence.
“Rationalizing taxes, especially on housing finance, will directly boost end-user demand, providing essential support to a sector struggling with a notable housing deficit and offering relief to homebuyers facing project delays due to cash flow issues, while also restoring overall buyer trust,” stated Parveen Jain, president of Naredco.
These remarks are part of a broader set of fiscal recommendations submitted by Naredco to the Union Ministry of Finance, aimed at revitalizing housing demand, improving rental supply, and mitigating litigation in the real estate sector, particularly in light of the upcoming Union Budget 2026.
Among its principal suggestions, Naredco has proposed significantly increasing the income tax deduction on home loan interest for owner-occupied residences. Currently limited to ₹2 lakh under Section 24(b) of the Income Tax Act, they recommend raising it to at least ₹5 lakh or permitting full deductions of interest paid, analogous to rented properties. Additionally, they have suggested eliminating the five-year completion condition for deduction eligibility.
Naredco has also advocated for the reinstatement of the Income Tax Settlement Commission, which was dissolved in February 2021. The industry group contends that its absence has led to drawn-out tax disputes, often lasting decades, contributing to uncertainty for businesses and investors. They assert that reintroducing the commission would help decrease litigation and alleviate court burdens, thereby improving the overall investment climate.
The organization has highlighted various tax provisions that discourage the development of rental housing, including limitations on offsetting losses from rental properties, primarily due to depreciation, against other income under the Income Tax Act. Hiranandani noted that while businesses can adjust losses from other ventures, rental housing faces structural disincentives despite being a priority in policy.
Hiranandani emphasized the necessity for a special window for affordable and mid-income housing (SWAMIH) fund to complete stalled projects across the country. “We need a housing revolution akin to the green revolution to ensure the ‘housing for all’ initiative,” he asserted, urging the government to modify current policies to tackle the industry’s challenges.
Naredco has called for the removal of restrictions under Section 54 of capital gains taxation that limit reinvestment benefits to a specific number of residential properties. According to them, the existing regulations disincentivize reinvestment in housing assets and rental supply, unlike other asset classes such as equities.
In their submission, they proposed lowering the tax rate for all non-corporate entities to 25% and capping the maximum tax rate for individuals at 30%, including surcharges and cesses. They argued that tiered tax rates, similar to the impact following GST implementation, would enhance compliance and expand the tax base.
Naredco concluded that resolving tax-related challenges, alongside ongoing infrastructure investments and housing incentives, is essential for maintaining housing demand and increasing affordable and rental housing supply in urban India.
