In a recent discussion, Deepak Shenoy, CEO of Capitalmind, underscored the enduring tax benefits associated with real estate investments. His insights are crucial for investors aiming to optimize their financial strategies by leveraging these advantages.
Shenoy elaborated on several significant tax benefits that make real estate an attractive investment option.Under Section 24(b) of the Income Tax Act, investors can claim deductions on the interest paid on home loans. For self-occupied properties, the deduction limit is ₹2 lakh per annum. This reduces taxable income, making home loans more affordable.Section 80C allows for a deduction of up to ₹1.5 lakh on the principal repayment of home loans. This is part of the broader ₹1.5 lakh limit available under Section 80C for various investments and expenditures.
Real estate held for more than two years is eligible for LTCG tax benefits. Investors can index the purchase price to account for inflation, which reduces the taxable amount of the gain.Sections 54 and 54F provide exemptions on capital gains if the proceeds are reinvested in another residential property. This encourages reinvestment in real estate and offers substantial tax savings.
Rental income qualifies for a standard deduction of 30% under Section 24(a) to cover maintenance and repair expenses. This significantly reduces the taxable rental income For properties that are rented out, the entire interest on the home loan can be deducted without any upper limit, offering considerable tax relief.Investors in commercial properties can claim depreciation on the property, further reducing their taxable income. This is especially advantageous for businesses and high-net-worth individuals investing in office spaces and commercial buildings.
Shenoy also shared insights on the broader market trends and strategic considerations for real estate investors. Real estate continues to provide stable and potentially appreciating returns, making it a foundational element of diversified investment portfolios.Real estate serves as an effective hedge against inflation, with property values and rental incomes generally rising in tandem with inflation. Including real estate in an investment portfolio offers diversification benefits, helping to reduce overall portfolio risk.
