Buying a property requires one to pay multiple taxes. It is often a burden on buyers to pay 12 percent GST on under construction projects along with stamp duty and registration charges. Though the GST Council is considering reducing the current rate to 5 percent, yet a middle-class buyer needs more flexibility when it comes to paying taxes while buying property. Tax deductions and exemptions, if availed appropriately, can go a long way in easing the overall financial burden of a property buyer.
Reaping tax benefits is an important aspect for a home buyer. "Buyers must ensure that the legal title of the property is maintained while buying. This will ensure that the buyer gets Income Tax benefit under section 54. Buyers should also make sure that when they invest in a property they will positively hold it for at least two years to gain tax benefits arising from long term capital gain," explains Vicky Wadhwani, Co-Founder, Sai Estate Consultants Chembur Pvt Ltd.
Stamp duty & registration charges
While the Government charges 5-7 percent of the property cost as stamp duty and registration taxes, one can claim tax deductions on these under Section 80C of the Income Tax Act, 1961.
Buyers who avail of a home loan can claim tax deduction under Section 24, 80C and 80EE of the IT Act for repayment on both the principal and interest amount after fulfilling certain pre-conditions. As per the Income Tax Act, tax benefit of home loan under Section 80C for repayment of the principal part of the home loan is allowed only after the construction is complete and the completion certificate (CC) has been awarded.
Under Section 24, a buyer can avail deduction of a maximum of 2 lakh for the interest portion of the home loan for the self-occupied property.
Under Section 80C, one can claim a deduction of 1.5 lakh on repayment of the principal portion of the EMI paid during the year.
Under Section 80EE, first-time home buyers can claim an additional 50,000 as the deduction, provided the loan amount is 35 lakh or less and the property value does not exceed 50 lakh.
Source: Times Property