Tax Benefits That You Get Against Your Property

There can be many reasons to invest in real estate. Some buy property because having homes of their own is their dream. Others put money in real estate to gain great returns on their investment in future. In other cases, it is a mix of both. However, the benefits you get on investing in real estate largely remain the same for all. It's a popular investment medium to save money, too. For instance, the government offers several tax benefits to home buyers.

As you prepare to file your income tax returns for the assessment year 2015-16, PropGuide lists key tax-related benefits that you can get because you have invested in real estate:

 Home loan principal repayment: Under Section 80C of the Income Tax (I-T) Act, you can claim up to Rs 1.5 lakh as deductions for repaying your home loan principal amount.

Stamp duty and other fees: Also under Section 80C of the I-T Act, you can claim up to Rs 1.5 lakh as deductions on payment of stamp duty, property registration and other expenses incurred during the property transfer process.

Home loan for under-construction property: If you have booked an under-construction property for your personal use by taking a home loan, you can claim Rs 2 lakh as a tax deduction. Earlier, there was a condition that the housing project must be completed within three years of taking the loan for one to be able to claim the money. Given the common problem of project delays and cancellations, many home buyers were not able to claim the amount under this head. To address this issue, in Budget 2016-17, Finance Minister Arun Jaitley announced increasing this period to five years.

Tax relief for first-time home buyers: To boost investments in the real estate market, Jaitley in his Budget 2016-17 speech announced tax deductions of up to Rs 50,000 on the interest paid against home loan. So, if you are a first-time home buyer and have taken a loan to do so, you can avail of this deduction. However, to avail of this benefit, you need to fulfil certain conditions. While the property you have invested in should not be worth more than Rs 50 lakh, the loan you have availed of for the purchase should not exceed Rs 35 lakh. Also, the loan must have been sanctioned between April 1, 2016, and March 31, 2017.

Tax benefits for co-owners of property: If a property that is purchased for personal use is jointly owned and the loan is co-borrowed, both the parties can claim deductions of up to Rs 1.5 lakh each on the repayment of the principal amount, and deductions of Rs 2 lakh each on the interest paid. The deductions on the principal amount would include the claims on property transfer-related deductions.