Tax-Saving Tips for Buying and Selling a Property

tax savings on house property

A house is a necessity for every human being.  We strive endless, to achieve the goal for ourselves, by making savings regularly, by taking home loans, and through other means. Fortunately, the government realizes the essentially of the home, and offers tax exemptions, so that we can make a more affordable and easy home purchase.

While the necessity list may include WI-FI as well, in recent times, the importance of a home is undeniable. It ranks first in the priority list of the majority of people, and is a commodity we all want to be there, having our name in the front. Buying or selling a home, is now more affordable, through the policy enactments of the Indian government.

Deductions toward the Home Loan Interest

You can buy a house through a home loan, and achieve tax exemptions as well. You can avail tax benefits towards your income tax payments, according to the Budget of the Financial Year 2016-17. The tax benefit may go up-to Rs 2 lacs, for a home/residential place that is occupied by self, or is vacant. These benefits have been provided under the section 24, and the Section 80C of the Income Tax Act.

Further, apart from the deduction above, you can also claim a tax deduction of up to Rs 50,000, if you do not own a property, and:

  • Take the loan from a financial institution, in between the dates 1 April 2016 to 31 March 2017.
  • The cost of the property is not more than Rs 50 lacs.
  • The loan amount does not exceed Rs 35 lacs.

You can also take a loan, and take tax exemptions for a property which is under construction. The cache is that the property must be fully constructed within 5 years, from the financial year in which the loan is taken.

Tax Exemptions towards the Principal Repayment

According to the section 80 C of the Act, you are also eligible for a tax deduction when you repay the home loan’s principal amount. The highest limit of exemption is Rs 1.5 lakhs. This home loan should only be taken for constructing, or purchasing, a new property.

Note: If the property is sold within 5 years of purchase/construction, the deductibles will be added back to your income.

Tax Exemptions for The First-Time Home Owners

As per the Section 80 EE of the act, you will get a tax exemption up to Rs 1 lac, when you own a house for the first time. The property should not have a market value of Rs 40 lacs, and the home loan amount should not exceed the figure of Rs 25 lacs.

Tax Exemptions Towards A Joint Home Loan

If you, along with a member of your family, jointly take a home loan, you can both get the tax exemptions, of Rs 2 lacs each, under the Section 80 C. Exemptions are also provided towards the transfer of property related charges, and charges related to stamp duty, and registration.

Saving Money While Selling The House, Through The Tax Exemptions

Apart from saving money while taking a home loan, and buying a house, you can also save, and make, money when you sell a house. While the house is a kind of capital asset, and the gains from its sale are liable to taxation, certain charges are exempted. Income tax on sale of house property is a bit relaxed by the Union government, so that all individuals can buy a house in an affordable manner. The tax related deductions, or the exemptions, relate to:

  • Commission/brokerage,
  • The travelling expenses that the seller has to incur, because of travelling related to the transfer of property, and
  • The charges that relate to the cost of the stamp papers.

Tax Exemptions Related To Re investments

You can sell your property and reinvest the money, in order to make money from the tax exemptions provided under the capital gain on sale of house property section 54.

To avail the discounts under the exemption, you should purchase your new house either 1 year before selling the house/property, or 2 years after selling it. You can also invest the gains made from the property sale, for constructing a new house. You will be provided the tax exemptions, when your new house is fully constructed within a 3 years of selling the old property.

So if you are looking for an answer to the question “how to save capital gain tax on sale of residential property”, the above points will solve your query.

As you can see, huge amounts of money are there to be saved, whether you buy or sell a house. The best way to make a more economical transaction is to plan it suitably, and do the required efforts, in time.

About Sashi 58 Articles
Sashi Singh is content contributor and editor at IP. She has an amazing experience in content marketing from last many years. Read her contribution and leave comment.

1 Comment

  1. Individual must preserve all the documents which are needed to provide proof that individual has used the loan amount on a house. If the amount was used to carry out repairs or renovations, he must preserve the bills for materials and labor. These are needed to claim the tax deductions.

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