You can claim a 30% deduction on rental income

I fall in the 30 percent tax bracket. I fully claim Rs. 1.50 lakh under Section 80C of the Income Tax Act 1961. Is there a way to save more taxes, for example by taking loans from banks to buy residential or commercial property and rent it out? Can I offset the interest payment or equivalent monthly installment (EMI) to the bank and reduce my tax payment?

Answer: In addition to the tax benefits under Section 80C, you can avail the tax benefits under Section 80CCD(1B) by investing Rs. 50,000 in your National Pension System (NPS) Tier I Account.

Regarding your question about the tax advantages available for the mortgage, please note that the income you earn by renting a property is taxable under the heading “Income from real estate ownership”. On the rent received, you will be entitled to a deduction of 30% of the rent received. With respect to interest on the loan taken out for these leased properties, you may claim full interest on these loans without any limit under Section 24 whether the property purchased is residential or commercial. That said, you will only be allowed to set off the loss under “Income from Home Ownership” only up to Rs. 2 lakh against other income in the current year, and the unabsorbed loss , if any, may be carried forward to be deducted from the income from the ownership of the house for the next eight years.

You are also entitled to claim the benefit in respect of repayment of the principal amount of the home loan within the aggregate limit of Rs. 1.50 lakh under Section 80C every year if you have purchased a residential property.

I had taken a home loan of Rs. 50 lakh from a bank in March 2018 to buy a house worth Rs. 65 million. This also includes stamp duties and registration fees. I have claimed the tax benefits for repayment of principal and interest till March 2022. Now I am planning to sell this house for Rs. 80 lakh in the current year. What are my tax implications on the profits made on this sale? I do not want to invest any amount to take advantage of the tax exemption. How will my tax payable be calculated?

Answer: Since you plan to sell the property after having held it for more than two years, the difference will be taxed as a long-term capital gain (LTCG) after indexation. Since you don’t want to invest money to qualify for an exemption, it will be taxed at 20.48%. Please note that the entire Rs. 30 lakh profit will not be taxable, only indexed capital gains. Your taxable capital gains will be calculated after deducting the indexed purchase price of the apartment from the net sale price. This will be calculated with reference to the cost inflation index for the year 2018 and the year in which you sell the apartment.

Please note that if the property is sold within five years of the end of the year in which it was acquired, any deductions allowed under section 80C of the Income Tax Act 1961 income for repayment of the home loan will be canceled and processed. as income in the year you sell this property. Please note that there is no similar provision for the reversal of interest tax benefits granted to you under Section 24 under the heading “Income from Home Ownership”.

The author is a tax and investment expert

(Disclaimer: Opinions expressed are those of the author and Outlook money does not necessarily subscribe to it. Outlook money will not be responsible for any damage caused to any person/organization directly or indirectly.)