Real Estate: Best Investment for Tax Benefit in India

Real Estate: Best Investment for Tax Benefit in India

Real estate investments have always been considered a wise and practical financial decision when it comes to tax benefits in India. In our country where tax planning plays a crucial role, real estate investments are not only the best investment for tax benefits but they also offer attractive long-term capital appreciation.


Let us understand the latest news, information on tax deductions, and more to maximize your benefits from real estate.


Tax Benefits


Tax Deduction on Home Loan Interest

Arguably the most important tax benefit from investing in Indian real estate is the tax deduction available on the home loan interest paid by you. Under section 24(b) of the Income Tax Act, homeowners can claim a deduction of up to ₹2 lakh per annum on the interest paid on home loans. This amount is for self-occupied properties, whereas for rental properties there is no such upper limit, giving investors the advantage of maximum tax benefits from buying real estate.


Also Read: Investment Options for NRIs in Pune Real Estate


Tax Deduction on Principal Repayment

In addition to the above deduction, the section 80(c) on the Income Tax Act provides for a deduction of up to 1.5 lakh per annum on the principal amount that is repaid for existing home loans. However, keep in mind that this deduction includes other investments such as provident fund (PF) contributions, life insurance premiums, and specific mutual funds.

Hence, investors can significantly reduce their taxable income by availing this deduction while filing their income tax return.


Capital Gains Tax Exemption

One of the best investments for tax benefits, real estate investments also bring along the potential for long term capital appreciation. But did you know that while selling property, investors can also avail exemption for long term capital gains tax under specific conditions?

Under section 54 of the Income Tax Act, individuals are allowed to claim tax exemption from long-term capital gains tax by reinvesting the amount from the sale of a residential property in another residential property but within a specific time frame.

This income tax provision not only encourages reinvestment in real estate but also enables diversification of the investors portfolio.


Tax Benefits for First Time Home Buyers

The government of India has been promoting homeownership with multiple schemes, one of which is an additional tax benefit for first time home buyers. Under section 80EEA, first time home buyers can avail a tax deduction of 1.5 lakh on the interest paid on home loan, if they meet specific criteria. Ofcourse, this deduction is in addition to the one available under section 24(b). Indeed, real estate is one of the best investments for tax benefits in India.


Latest Tax News & Developments


Boost to the Affordable Housing Segment

Addressing the housing needs of the economically weaker sections of the Indian society, the government’s push on affordable housing has led to a number of initiatives that aim to incentivise investments in this segment of real estate.

In the Union Budget 2023-24, the finance minister had announced various measures that promote affordable housing, including extension of tax holiday benefits for such projects.

The move is expected to increase real estate investments in the segment.


Infrastructure Status for Rental Housing

In an important latest development, the government has granted the rental housing segment – Infrastructure status. With this status, rental properties across the country can avail benefit of various tax incentives and financing options, thereby making the most of a lucrative opportunity.

This move is aimed at increasing institutional investment in the rental housing sector and boost the supply of rental properties across India.


Introduction of REITs and InvITs

In recent years, Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) have emerged as popular investment vehicles in the real estate sector.

These financial instruments offer investors an attractive opportunity to participate in income generating real estate assets and also avail tax efficient returns! The Securities and Exchange Board of India (SEBI) has introduced regulatory reforms that aid the growth of REITs and InvITs in the country.


Hence, real estate remains one of the best investment for tax benefits in India. The deductions on home loan interest payments, principal amount payments, first time homebuyer advantage, and capital gains tax relief, significantly reduce the overall tax liability of the investor. The government schemes and measures further enhance the potential of real estate investments and property ownership.

If you’re a real estate investor, it’s the perfect time to leverage above tax benefits, enhance returns and ensure your long term financial security. If you’re looking for a perfect home in Pune, the projects by Naikanavre Developers in preferred residential areas of the city are an attractive option.

With a large range of projects to choose from – 1 or 2 BHK homes amidst the beauty of nature in Aranya at Talegaon, or fully serviced NA Plots at Avasa Meadows in Talegaon or luxurious 2 & 3 BHK apartments in Shivaji Nagar, you will be spoilt for choice. They also have a commercial project in pune, 7 Business Square on Ganesh Khind Road offering premium offices and retail spaces at a strategic commercial location with maximum advantage.

With a limited inventory of uber luxury commercial spaces available, their project Esmeralda Business Square in Goa’s Kadamba Plateau region is also a wise choice for real estate investors. Look no further, invest now!

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