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Real estate investments are popular in India, but they often come with substantial tax obligations due to their high initial costs. However, strategic planning can significantly reduce the tax burden associated with real estate investments. Here are four unique ways to minimize taxes on your real estate investments.
Invest in Real Estate Investment Trusts (REITs)
REITs have democratized real estate investing by allowing individuals to invest in income-generating commercial properties for as low as Rs 10,000. Investors in REITs don’t own the properties themselves but are entitled to a share of the income generated. The advantage is that there are no registration charges or property taxes for retail investors in REITs. To minimize tax on gains from REIT unit sales, consider selling a limited number of units at a time after a specific holding period to ensure that long-term capital gains remain below Rs 1 lakh.
For Ready-to-Move-In Properties
Choosing ready-to-move-in properties with an Occupancy Certificate can help you avoid the Goods and Services Tax (GST). While such properties may be more expensive than under-construction ones, they present lower risks, as buyers can inspect the property and its amenities before purchase.
Take Advantage of Home Loan Benefits
If you’ve taken a home loan for your property, you can benefit from tax deductions under Section 80C and Section 24(b) of the Income Tax Act. This includes deductions on the principal repayment and interest paid on the loan, reducing your overall tax liability.
Joint Ownership and Gifting
Consider joint ownership of the property with family members, as this can help distribute the tax liability. Additionally, gifting real estate assets to family members can be a tax-efficient way to transfer property while minimizing the tax impact.
In conclusion, these innovative strategies can help you optimize your real estate investments by minimizing the tax burden, making your investments more financially efficient.