How to save tax from your real estate investment?

Buying a property is the biggest purchase or investment that most people make in their lifetime and the government realizes this. The government has allowed income tax deduction if the property is purchased on loan. The borrower can claim deduction from 1.5 lakh to 2 lakh under the Income Tax Act on home loans. Entire interest can be deducted directly from income if the property is not occupied by the borrower. These above conditions apply even if the money is from friends, family or private sellers.

There is a problem with the current market situation, as projects are delayed in completion. This in turn causes problems for borrowers. If their house is not fully constructed then the borrowers cannot deduct any interest. A buyer, on the other hand, receives the benefit of the principal amount. Upon possession, the borrower of the property can claim a deduction for the interest paid during the pre-construction period. To take advantage of the current scenario, a couple must take out a joint loan that allows each to claim a full tax deduction for both principle and interest. This also applies to children and parents.

If the borrower has only one house and is self-occupied, there is no taxation in this case, but if there are more houses and it is neither exempt nor occupied, then taxation here can be a bit complicated.  In such a case, the owner should get the national rent value and pay tax on it. An appropriate method is followed to calculate the national price, taking into account the value of the municipal property and the Rent Control Act or the ongoing rental rates of the locality.

If a person is trying to claim a housing loan deduction and Housing Rent Allowance (HRA) at the same time, it causes trouble. Many claim HRAs because they have a home in a different city and live in a different city. The department allows you to claim an HRA in the same city with real reasons, such as if you have a suburb in the city and your office in the city. When calculating the national value of your second home, you can deduct some taxes like municipal taxes and also 30 percent of the value for repairs and maintenance.

When it is time to sell the acquired property, the tax paid is calculated on the profit generated. If it is sold within three years of acquisition, the seller is required to pay Short Turn Capital Gains (STCG) and the time period is more than three years, they are required to pay Long Turn Capital Gains (LTCG) requires surcharge which is more than about 20 percent. If one buys a new asset equal to the long-term capital gain within one year before the date of sale, the entire tax outgo can be saved. This property is under construction. The time period is three years. While calculating STCG and LTCG tax, one can deduct money on corrections and also to acquire assets such as payment of stamp duty, legal fees and brokerage.