The taxation on property purchases has become much more straightforward than it was before. Real estate continues to be one of the most popular investment strategies for protecting and growing one’s wealth. Owning a property is somewhat equivalent to being a small business owner, which makes it easier to deduct quite a few expenses.
Purchasing a home loan allows you to enjoy multiple tax benefits and exemptions that help you save tax but also help in managing smooth cash flows.
Combined with the enticement of generating cash flow, investing in real estate also opens a treasure chest of tax advantages that renting does not.
Purchasing a home loan allows you to enjoy multiple tax benefits and exemptions that help you save tax but also help in managing smooth cash flows.
Combined with the enticement of generating cash flow, investing in real estate also opens a treasure chest of tax advantages that renting does not.
Here we have given a break down of all such benefits for you.
1. Deductions
One of the most significant real estate tax benefits available for investors is in the form of deductions. Section 24 allows you to claim exemptions on the interest you pay on home loans. This section goes by the title ‘Deductions from income from house property.’ Under this section, deductions are allowed from the income that an individual earns through house property.
2. Section 80C
Under Section 80C, one can claim a deduction of Rs 1.5 lakhs on repayment of the principal portion of the EMI paid during the year. However, the owner must not sell the property for at least five years after taking possession, or else, the deduction claimed earlier will be added back to the owner’s taxable income in the year of sale.
3. Capital Gains
1. Deductions
One of the most significant real estate tax benefits available for investors is in the form of deductions. Section 24 allows you to claim exemptions on the interest you pay on home loans. This section goes by the title ‘Deductions from income from house property.’ Under this section, deductions are allowed from the income that an individual earns through house property.
2. Section 80C
Under Section 80C, one can claim a deduction of Rs 1.5 lakhs on repayment of the principal portion of the EMI paid during the year. However, the owner must not sell the property for at least five years after taking possession, or else, the deduction claimed earlier will be added back to the owner’s taxable income in the year of sale.
3. Capital Gains
A capital gain can be short term or long-term. You can claim capital gain on income taxes. Short-term capital is taxed as ordinary income, so it depends on the tax bracket. A long-term capital depends on the salary, your marital status, etc.
4. Depreciation
Some might consider depreciation as the most effective tax benefit of investing in real estate. Depreciation expense is typically the most substantial tax deduction available to real estate investors and can help improve their cash flow by reducing their tax liabilities. Over time, the real estate property one has invested in starts to break down.
5.Tax-Free Borrowing (Refinancing)
If you refinance, you can borrow against the appreciation and increased equity of a property tax-free. For example, let’s say you bought an apartment for Rs. 75 lakhs. The property is now worth one crore. You do a cash-out refinance and pull out Rs. Seventy-five lakhs to put toward the purchase of the next building. This a tax-free situation where you can utilize to continue growing your streams of passive income without paying more in taxes.
Here are some of the best upcoming real estate projects such as Reventa Royalty, Sadhr Gardens, Phoenix One, Garden City, The Sky Court, Dasnac across major cities in India which are an ideal place to invest and will help you reap tax benefits.
I hope, this article helps you to save tax benefits while buying your dream home. Do share your valuable thoughts in the comment section below.
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