Real estate investment continues to be one of the most lucrative forms of financial investment. Not only does it offer the property owner multiple sources of additional income and the advantage of value appreciation, but it also comes with a host of tax saving benefits.
Here are some ways in which you can make the most of real estate investment in order to save tax:
- Tax exemption on home loans: Under Section 80C, homeowners can avail of a tax exemption of Rs. 1,50,000 on the repayment of the principal amount of a home loan. Tax exemptions of higher value (up to Rs. 2 lacs) are also applicable on the repayment of the interest amount of the home loan. This exemption is applicable regardless of whether the property is self-occupied or let out on rent.
- Tax exemption on investing in second property:Investing in another property, in addition to the one that you already own, comes with a significant tax saving benefit. If you avail for a home loan against this property purchase, then the tax exemption that you get on the interest amount to be paid for the loan is without an upper limit. The exemption is applicable provided the property is used for rental purposes and not self-occupancy.
- Benefits on long-term capital gains: Long-term capital gain refers to the wealth acquired upon disposing a property asset after a minimum period of 3 years. Long-term capital gains are much higher in value than short-term capital gains (which is what you acquire when you re-sell a property within 3 years of having owned it), which is why it is liable to higher taxation. However, if you reinvest these long-term capital gains into new property within 3 years of having sold it, then you will not have to pay any tax on the gains. The same is not applicable in the case of short-term capital gains.
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