Real estate has been the storehouse of wealth in India in the last decade. Given the support that our income tax laws provide for investments in real estate, it has now become a popular choice of investment. With property prices shooting through the roof, availability of loans to acquire a property, complex legal work required for the acquisition, property evaluations and managing expectations on the returns -these investments have added stress to investors’ life.
We advise our investors to smoothen their real estate investments – tax planning, loan computations, financial leverage assessment, returns on investments, tax filing of capital gains, legal paper work for acquisition, assessing income/loss from house property et al are areas we specialise in.
With our associates we are one-stop shop for real estate investments. We help our clients plan for acquiring their dream home or upgrading their existing house to a larger house, focusing not only on capital gains assessment but also yields and their tax implications for lease/rented properties for individuals & corporate cases.
Here are some of the tax advantages that Income Tax laws provide to the housing sector:
- You, as a tax payer, get a deduction towards interest up to Rs. 2 Lacs on loan for a self-occupied property per FY.
- You get to deduct even the principal (upto Rs 1.5 Lac) under Section 80(C) for a self-occupied property.
- If you have a second house and if it is a let-out property, you can deduct the full interest (NO LIMIT!) from your rental income.You also get to claim deduction towards municipal taxes paid during the relevant FY and a flat deduction of 30% of the annual value towards repairs.
- The loss, if any, from the house property after considering the aforesaid deductions can be offset against income in any other head of the current FY. In other business you can deduct interest against income made from that business and not against your salary or income from capital gains. In short-term trading of shares, any losses made can’t be used to offset your salary. But for the loss from house property, such is not the case.
- The loss, if any, which cannot be set off against the current FY’s income can be carried forward to subsequent FYs subject to a maximum of eight FY’s for set off against the income from house property of subsequent FYs.
- Capital gains that you make when selling the house can be exempted from tax by buying another house if they are long term capital gains.
- If you make capital gains by selling other capital assets like shares, government bonds and/or gold, you can buy a residential property with the sale proceeds and need not pay the tax on your capital gains if they are long term capital gains.
- Any property which is given out on rent for a minimum period of 300 days in the previous year is not considered as an asset. Such a property i.e. let out for 300 or more days, is excluded from net wealth and not subject to wealth tax as per the prescribed provisions of the wealth tax law.