Tax advantages of Investing in Real Estate

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Investing into real estate is something that’s done by those who wish for long term returns. But another reason as to why people invest in Real Estate is simply to avail the tax benefits they get from it. A good understanding of the ways in which one can save money from being deducted in taxes is what will result in them saving a lot more.

For instance, the first home that you purchase, that too on a loan, is eligible for deductions under section 80C to upto 1.5 Lakhs. If in case the property is self occupied, then under section 24(b), a 2 Lakh benefit is available. A point worth noting is that this is valid if the construction is completed within 3 years only.

In the case that the property is not self occupied then the interest amount paid to the lender can be deducted from the income.

But for a property which is still under construction, interest deduction from the taxable income will not be allowed until the construction is completed. The total interest that is paid on the home loan taken during the time before the completion can be claimed in five installments as deductions starting from the year the construction was completed.

All the people who are also part of the investment or are co-owners are also eligible for tax deductions provided that they have also taken it on a loan or are co-borrowers.

In regards to the sale of a property, if a property is sold within 3 years of its acquisition, it is considered as a Short Term Capital Asset (STCA) and as per the slab rates is taxed respectively.

But if it is sold after 3 years from the date of acquisition, it is considered to be a Long Term Capital Asset (LTCA) and is beneficial as 20% concession is provided while being taxed.

Furthermore, there is tax exemption provided in case one wishes to re-invest in another house using the sales proceeds of the existing house or the LTCA. The only thing to ensure here is that the new house or property needs to be constructed within 3 years of the sale of the previous or original property.

Hopefully the next time you invest, you are aware of all these little tips and facts before going ahead with you invesment decisions.

Happy Investing 🙂

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