One wise move is to own a property for investment. Many people are unaware, though, that there are several investment property tax deductions they could be entitled to reduce their taxes. You can maximise these in the following ways.
Define an Investment Property:
- A house, apartment, or plot purchased for profit or rent.
- Not the house you reside in.
- Made for profit rather than personal consumption.
You have to pay taxes whether you pay rent or profitably sell the house, but you can also be eligible for deductions.
Principal Tax Deductions for Investment Property:
These are some typical deductions that are possible:
- Home loan interest: Up to ₹2 lakh yearly under Section 24(b).
- Municipal taxes: You could write off property taxes paid to the local government.
- Standard deduction: A flat deduction of thirty percent of rental income.
- Maintenance and repairs: Should it be rented, minor repairs could be included into the 30% standard deduction.
- Pre-construction interest: Claimed in five equal portions following ownership.
Deductible Capital Gains:
Should you choose to sell the house:
- Long-term profits (kept for two plus years): 20% tax accompanied by indexation advantage.
- Investing in another house (Section 54) or capital gain bonds (Section 54EC) will help you to save taxes.
Many investors make advantage of these main components of investment property tax deductions.
Claiming These Deductions: How Should I Approach:
- Use proper ITR form—usually ITR-2 or ITR-3.
- Clearly show rentals income and deductions.
- Maintaining records includes loan statements, tax receipts, sales deeds.
- File before the deadline to stay free from fines.
Typical Errors to Stay Away From:
- Not showing any rental income whatsoever.
- Claiming deductions from occupied real estate.
- Missing the division of loan interest.
- Ignoring the tax on advance rent or deposit interest.
Last Advice:
- Always declare even if the house is empty.
- If you run several properties, see a CA.
- Clearly document all income and expenses.
Using investment property tax deductions properly will lower your tax load and raise your returns.
