As the real estate sector remains one of the most invested sectors, the government of India is trying its best to make this process simpler and faster.
If you are planning to buy a property in India, you must be aware that there are several tax implications which are involved in it.
The government of India has implemented GST and RERA, where GST has subsumed different taxes like service tax, VAT, etc., and RERA has been beneficial in making the property transitions more transparent in India.
Real estate can be a way for you to create assets to provide financial stability and security for your future.
By utilizing the below-mentioned points on saving taxes, you will be able to achieve maximum benefits on your future property.
Learn about the local registration and stamp duty laws
The registration charges and stamp duty differs from state to state. So ensure to learn about the local rates of your state before purchasing the property.
Affordable housing schemes for tax relief
The government of India has offered several tax benefits for potential homebuyers in the affordable housing scheme. For the economically weaker section. For the lower-income group and the middle-income group, various credit-linked subsidy schemes are available. Under the affordable housing scheme or also known as Pradhan Mantri Awas Yojana, one can buy a property and get a tax deduction on GST. It implies that instead of giving 5% GST, you only have to pay 1% GST.
Get GST exemption on ready-to-move properties
According to the Goods and Services Tax (GST) Council, if you purchase a property that is currently under construction then a GST of 5% will be applied. But if you purchase a property that is ready to move in, then you don’t have to pay any GST. So if you’re planning to purchase a property, choosing a ready-to-move property will help you save on some taxes.
For women buyers get stamp duty rebate
As we know stamp duty is a tax that is payable on the agreement of sale on the date of registration or before that. To confirm the purchase of property legally, the payment of stamp duty has to be done. In India, in the majority of the cases, the rate of stamp duty is 5% of the total property cost, but it may vary from state to state. So to get a rebate of 2% on your stamp duty it is recommended to register the property in the name of women. Many states offer women tax rebates on stamp duty.
Go for a home loan
Under sections 80C, 24, and section 80EE of the IT Act, it is stated that if you can meet certain required criteria then you can claim for income tax deductions on the principal amount as well as on the interest amount. So buying a property with a home loan can also help you in saving some of the income tax.
Also, if you go for a joint loan, then both the holders of the loan are eligible to claim a tax deduction of up to Rs. 1.5 lakhs on the principal amount and up to Rs. 2 lakhs on the interest amount that is paid in a financial year.
Avail tax deduction on principal repayment
One more way to avail tax deduction on your new property is that if the homebuyer keeps the property under his/her name for at least 5 years then he can claim a deduction of Rs. 1.5 lakhs.
Use the government guidance rate to get the registration charges reduced
Government Guidance Rate or also known as Circle Rate is a rate that is maintained by the government, it is a minimum value at which you can register a property. This rate is comparatively lower than the market price of the property. So if you are registering your property, you can register it at this rate as well. But the majority of the banks offer 80-90% of the market value/registered value of the property in home loans, so this option might not be suitable for you if you are unable to arrange higher down payment.
There are several ways by which you can pay low tax on the purchase of a home, and many are unaware of it and therefore end up paying a very high amount of tax. Apart from all the benefits, as per section 80C, some expenses are not eligible for deduction. They include the admission fee, cost of share, and the initial deposit that the company shareholder or any member of the society has to pay to be a part of the same. Also, the cost of renovation or any cost of further alteration that is carried out after the possession of the property cannot be deduced.