PMAY and the Tax Benefits You can Get

  • PMAY scheme aims to bring affordable homes to all by 2022
  • Tax benefits to encourage participation from private players
  • 100% tax exemption to benefit private companies involved in construction
  • Service tax exemption for companies offering services for PMAY projects

The Pradhan Mantri Awas Yojana (PMAY) is a government scheme that envisages ‘Housing for All’, by the year 2020. Launched in June 2015, it mainly caters to the Economically Weaker Sections (EWS), Low-Income Group (LIG) and Mid-Income Group (MIG) of the population.

Demand for affordable housing has far outstripped the supply. The high cost of living coupled with exorbitant cost of real estate means that owning a flat is a luxury that much of the population cannot afford. For Pradhan Mantri Awas Yojana to succeed in its purpose, there needs to be active participation from the all the parties involved, including the private players.

There needs to be sufficient incentive for all those involved, so that they can contribute in the best possible way and speed up the progress. The government is doing its part, and has offered several tax benefits for those involved in this affordable housing scheme.

100% Tax Exemption for Private Players

This a major step that has been taken to encourage participation in the PMAY scheme. All the private companies that are involved in the construction of 30 sq. metre houses in metro cities, and 60 sq. metre houses in non-metro cities will benefit from 100% tax exemption. The projects should be of the affordable housing segment and approved between the period of June 2016-March 2019.

Another criteria is that these have to completed within three years of construction approval. Putting such a condition will lead to faster construction and availability of homes at a faster rate for those who need it.

Reduction of GST

As mentioned earlier, the participation from private players is crucial towards the success of the PMAY scheme. The tax incentives are given with a view to encourage new and existing private players to take part in large numbers. While participation from private players is important, it is also equally necessary to address the supply side in the realty sector.

A well-incentivized services sector for real estate projects will go a long way in filling the supply and demand gap that exists in the affordable housing segment. To this end, the government has reduced all relevant services catering to construction projects under PMAY from GST of 18% or 28% to an effective rate of 8%.  This incentivizes builders to pass on the tax benefit to the buyers, making homes more affordable.

100% Excise Duty Exemption

The Finance Minister has also attempted to bring down costs for those involved in the construction of affordable homes under the ‘Housing for All’ scheme by exempting 100% excise duty on one of the most crucial material used in construction projects – Ready Mix Concrete.

Companies involved in the construction will be able to procure this vital material at a reduced rate, thereby allowing for more flexibility in allocation of resources and increased pace of construction.



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