The coronavirus pandemic left buyers uncertain about their investment options, including investments in real estate. If you are looking to buy commercial property in Surat but are unclear about the tax benefits, this article is for you.

Properties are considered huge investments by the average Indian buyer. But few people are aware of the expense deductions that come with it. The It department treats the properties like small businesses, allowing buyers to enjoy multiple tax benefits.

The following Sections of the Income Tax Act of India outline the tax reliefs for Real Estate investments.

Section 80C:
Section 80C of the ITA allows you to deduct up to Rs. 1.5 Lakhs from the Total Taxable Income of those who have made investments. Since buying property is an investment you can deduct the amount from your income, claiming it towards the home loan. This tax benefit is purely on the total expenditure towards payment of the principal amount in that year. There is no minimum claim amount, but the upper limit is Rs.1.5 Lakhs.

Section 24:
Of course, loans are not just the principal amount, but there is a substantial interest involved. This is where Section 24 helps you. This section allows exemptions for interest on borrowed capital.

Under the existing tax regime, the deductions can be up to Rs.2 Lakhs on Home loan interest if the buyer or their family resides on the property. If the house is for rent, you can still claim the deduction of home loan interest on the rental income, under Section 24(b).

Capital Gains:
The term Capital Gains refers to the profit generated by the sale of a property or investment.

Short-term Capital Gain refers to the profit made if the property is sold within 3 years of purchase. In the case of short-term capital gains, they are considered income and accordingly taxed. For investors whose total income crosses 10 lakhs, there is a 30% tax levied on it. Post 3 years the profits are long-term capital gains which get taxed at 20%, after taking indexation into account.

Profits made from property sold within 5 years of purchase are considered Long term Capital gains. In this case, tax benefits under Section 80C will get reversed, but you can still avail of the benefits under Section24 (b). Any amount extended towards principal will get taxed, but loan interest can be claimed as a deduction.

Depreciation:
The tax benefits from depreciation are by far the largest tax deduction for the buyers that significantly improve their cash flow towards repayment of home loans.

With prolonged use, real estate properties experience wear and tear. The owner has to reinvest in the house to make repairs and renovations for its upkeep. The improvement costs and the depreciated purchase price can be claimed in tax deductions. This depreciation comes into effect as soon as the house is owner or tenant occupied.