The Indian real estate market is booming, projected to reach a staggering US$1 trillion by 2030 and contribute 13% to the nation’s GDP by 2025. Experts predict even greater growth in the coming decades, making real estate a compelling investment opportunity. Property values in prime Kharar, Greater Mohali locations, such as Sunny Enclave and Landran Road, are expected to grow by 25%-30% over the next five years.
Why Ride the Real Estate Wave?
The real estate sector is experiencing rapid expansion, driven by government initiatives like the Smart City Project and PM Awas Yojana, which aim to provide affordable housing for millions. The government also supports numerous tax benefit schemes to encourage real estate investment.
Among many investment options, real estate has proven lucrative for those looking to save on taxes. Investing in real estate can provide excellent returns as your property value appreciates, along with a corresponding increase in rental income.
Owning property, enjoying tax benefits, and earning rental income make it clear that now is the time to consider real estate as a key component of your investment portfolio.
This blog post serves as your action plan for leveraging real estate investments to minimize your tax burden in 2025 and beyond.
Maximizing Tax Benefits Through Real Estate Investment:
Beyond capital appreciation, real estate offers a range of tax advantages:
Home Loan Interest Deduction (Section 24)
Claim deductions on home loan interest payments. For self-occupied properties, the deduction is capped at ₹2 lakhs. For rented properties, there is no upper limit.
Capital Gains Tax
Profits from selling a property are subject to capital gains tax. Long-term capital gains (for properties held for over two years) are taxed at 20% with indexation. Exemptions are available under Section 54 if the gains are reinvested in another property within a specified timeframe.
Rental Income Deductions
Rental income is taxable, but you can deduct expenses like repairs, maintenance, property tax, and insurance. A standard deduction of 30% of the net rental income is also allowed.
Repairs and Renovations
Expenses on repairs and renovations can be claimed as deductions under Sections 30 or 31 of the Income Tax Act.
Property Tax Deduction
Property tax payments can be deducted under Section 80C, within the overall limit of ₹1.5 lakhs for permissible investments.
Understanding GST on Property Purchases:
Navigating the Goods and Services Tax (GST) on property purchases can be complex. Here’s a simplified breakdown:
- Under-Construction Properties: GST applies to these properties. The rate is 1% for affordable housing and 5% for non-affordable housing.
- Ready-to-Move-In Properties: No GST is levied on these properties, provided they have a completion certificate. This translates to immediate tax savings upon purchase. Choosing a ready-to-move-in property, such as a villa in Kharar, allows you to completely bypass GST, putting those potential savings directly back into your pocket.
Act Now for 2025 Tax Planning:
The information provided here is for general guidance. Tax laws are subject to change, and individual circumstances vary. Consult with a qualified tax advisor to create a personalized tax-saving strategy tailored to your real estate investments. By understanding the intricacies of GST and the available tax benefits, you can make informed decisions that maximize your returns and minimize your tax liability in 2025 and the years to come.
