Investing in real estate has always been a popular option for individuals looking to grow their wealth and secure their financial future. And with the growing demand for residential property in Thane, the real estate market in the area has seen a surge in activity in recent years.
But aside from the potential for long-term appreciation, investing in real estate also comes with a number of tax benefits that can help you maximize your returns and minimize your liabilities. In this article, we’ll explore the top 5 tax benefits of investing in residential property in Thane, and show you how you can take advantage of these incentives to make the most of your investment.
Deduction on Home Loan Interest
One of the most significant tax benefits of investing in real estate in India is the deduction available on home loan interest. As per the Income Tax Act, 1961, you can claim a deduction of up to Rs. 2 lakhs on the interest paid on a home loan for a self-occupied property. If you have taken a joint home loan with your spouse or any other co-owner, each of you can claim a deduction of up to Rs. 2 lakhs on the interest paid.
Furthermore, if you have taken a loan for a let-out property, there is no upper limit on the amount of interest that you can claim as a deduction. However, you can only claim the actual interest paid during the financial year as a deduction.
Deduction on Principal Repayment
Apart from the deduction available on home loan interest, investors can also claim a deduction on the principal repayment amount under Section 80C of the Income Tax Act, 1961. The maximum deduction available is Rs. 1.5 lakhs per financial year, which includes the principal repayment amount of your home loan.
It’s worth noting that this deduction is available only for a self-occupied property. If you have taken a loan for a let-out property, you can’t claim a deduction under Section 80C.
Depreciation Benefit
Real estate investors in India can also claim a depreciation benefit on their rental property. This deduction is available under Section 32 of the Income Tax Act, 1961, and allows you to claim a deduction for the wear and tear of your property.
The rate of depreciation that you can claim depends on the type of property you own. For residential properties, the rate of depreciation is 10%, while for commercial properties, it’s 15%. This deduction can significantly reduce your overall tax liability and is an excellent way to offset any rental income you earn from your property.
Capital Gains Tax Exemption
If you sell a property that you have held for more than two years, you are eligible for long-term capital gains tax exemption. Under Section 54 of the Income Tax Act, 1961, you can claim an exemption on the capital gains amount if you use the proceeds to purchase another property within two years or construct a property within three years.
The amount of exemption you can claim depends on the amount of capital gains you’ve earned from the sale of the property. If you purchase a property of equal or higher value, you can claim a complete exemption on the capital gains amount. However, if you purchase a property of lower value, the exemption amount will be proportionately reduced.
Tax Benefits on Joint Ownership
If you purchase a property jointly with your spouse or any other co-owner, you can claim tax benefits on both the home loan interest and the principal repayment amount. Each co-owner can claim a deduction of up to Rs. 2 lakhs on the home loan interest, and up to Rs. 1.5 lakhs on the principal repayment amount.
Furthermore, if the co-owners are in different tax brackets, it is possible to split the income earned from the property and reduce the overall tax liability. This is an excellent strategy for married couples who have different income levels.
Investing in residential property in Thane, India can be a smart move for those looking to make the most of their investments. Apart from the potential for long-term gains, investors can also enjoy significant tax benefits that can help them reduce their overall tax liability.
So, if you are considering investing in real estate, be sure to explore the above mentioned tax benefits available to you and make an informed decision that can help you maximize your returns.
