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Tax Benefits of Investing in Real Estate You Should Know About

Real Estate Tax Benefits

Investing in real estate in India is one of the best ways to achieve wealth and financial freedom. Owning a property is somewhat analogous to being a small business owner, which makes it easier to deduct quite a few expenses. Purchasing a home on a loan lets you enjoy multiple tax benefits and exemptions that helps you save tax but also help in managing smooth cash flows. However, Tax law is a bit complicated.

Here we break it down for you.

1. Section 24

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. You can do only 2 types of deductions; Net Annual Value which is Standard deduction and Interest on Borrowed Capital. No other deductions are allowed under Section 24.

2. Section 80C

Under this section you can claim tax benefits on the repayment of the principal amount. You can claim deductions on investments made in the return of income. The income should be for the year in which the investment was made. The maximum tax saving limit is Rs 1.5 lakh. There is no minimum limit.

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 income, your marital status, etc.

4. Depreciation

Some might consider depreciation as the most powerful tax benefit of investing in real estate. Depreciation expense is typically the largest 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. Only an income-producing property based on wear and tear is allowed to be written off.

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