New Delhi: Sometimes, the income tax burden can prevent you from making maximum savings or investments in life. Hence, there are several tax-saving strategies you can adopt to keep your share of income. While there are several tax exemptions in the Income Tax Act, investing in real estate can be one of the most efficient methods of saving taxes and it will also make sure that you withstand the losses due to depreciation, if any.
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How Real-Estate Investment Can Save Your Taxes
The most popular way to save your income taxes in which real estate investors can claim tax deductions include:
Depreciation: Most of the assets in real estate investment come with a depreciating value and depreciation can be your key to saving taxes. For the unversed, depreciation refers to the loss in value of an asset over time and real-estate investors can deduct this amount by showing it as an expenditure in their financial statements. Depreciation would lower the amount of tax payable during the year. This may look like a small initiative, bit in long run, it can actually help save a significant portion of the investor’s earnings.
Investing In Agricultural Land: As India is a land of agriculture, investing in agricultural land could be the best way to leverage the benefits that come with it. It’s one of the top most choices for real-estate investors as no tax is imposed on the sale of agricultural land, which is one of the most important and appealing tax exemptions.
Moreover, saving taxes becomes easier in such cases as no capital gain tax is imposed on such a sale since agricultural land isn’t classified under capital assets, according to Section 54 of the Income Tax Act.
Apart from this, owning agricultural land can open the gates for attractive returns as it can be used for organic farming and could also be leased out on rent to farmers.
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House Property Tax Exemptions: While planning to save taxes, you also need to know what are the House Property Tax exemptions. While the sale of a property attracts capital gain tax, it can be waived off as per the exemptions mentioned in Section 54F of the IT Act. In case the acquired money from the sale of a residential property is reinvested in a house property within three years of purchase, no income tax will be paid on that amount. And, if someone has invested in a residential property one year prior to selling a capital asset then the capital gain tax is exempted.
