Investing in real estate in India is one of the best strategies for protecting and growing one’s wealth. Combined with the satisfaction of generating cash flow, investing in real estate also comes with a slew of tax advantages that renting does not. The trick is to understand what’s available and how to capitalise on it. Moreover, when you are purchasing a home on a loan, you enjoy multiple tax benefits and exemptions that not just helps you save tax but also in managing smooth cash flows.

Let us break down the top real estate investing tax benefits right here for you, including some of the top deductions for real estate investors who have taken home loans:

Section 24

This section goes by the header ‘Deductions from income from house property’. It allows you to claim two types of deductions. First, there is ‘Net Annual Value’ which is the standard deduction. The second type of deduction is on ‘Interest on Borrowed Capital’. Under this section, you get entitled to deductions on the interest paid on home loans and income that you earn through house property. No other deductions are allowed under this section.

Section 80C

Under this section you can claim tax benefits on the repayment of the principal amount of home loan. So, this effectively means that when you buy a new property in Ghodbunder Road Thane with a home loan, you become entitled to tax deductions right away. The income should be for the year only in which the investment was made. While there is no minimum limit, the maximum limit for deduction is Rs. 1.5 lakh.

Capital Gains

Capital gains are the profits that homeowners make by selling their real estate property, which could be a rental, residential, commercial or industrial property. The capital gain can be taxed in short term or long term. Short term capital gains tax applies on gains from property investments that were held for one year or less. Long term capital gains are made on properties that were held for over one year, which are generally linked with rental properties. Long term capital gains are much more desirable for investors as they will be taxed far less. Plus, they can utilise the previous deductions to lower their taxable amount.

Depreciation

Sometimes depreciation is considered as the most powerful tax benefit of investing in real estate. This is because depreciation expense is typically the largest tax deduction available to real estate investors and it can help improve their cash flow by reducing their tax liabilities. Depreciation is categorised as a net loss on a property investment, even if it produces positive cash flow. It essentially implies recovering the cost of income-producing property with annual tax deductions. Therefore, investors putting in their money in luxury homes in Dahisar can save every year through this depreciation deduction.