Tips for Real Estate Investment India

An investment in real estate is generally a long-term commitment; wherein the funds may be blocked for as much as 15-20 years to gain a decent return. Also, considering the fact that purchasing a real estate property requires large amount of funds, it is wise to take the plunge after careful deliberation. For the average investor, the best strategy to invest in real estate in India is to finance at least a part of the property with a loan.

Benefits of Property Investment in India with a Loan

Purchasing a property on loan will not only ensure that you have a roof over your head, but will also help you in building significant tax savings. When a property is purchased on a loan, the interest paid on it is allowed to be claimed as a legitimate loss, which may be adjusted against your income from salary. In case the property is let-out, the interest paid on the loan is allowed to be deducted while computing the income from house property.

It is worth noting that a loan in this case need not necessarily be taken from a bank or financial institution, but may be taken from a friend or relative. Besides, the interest rate charged on such loans is not subject to any restrictions under the Income Tax Act.

Real Estate Investment and Income Tax Planning

Section 80C of the Income Tax Act allows tax payers to claim deduction up to Rs.1,00,000 within one assessment year. Investments recognized under Section 80C, besides real estate loan, are contributions to LIC and provident funds. It must be noted that if your contributions to the LIC, PF and other investments recognized in 80C exceed Rs.1, 00,000, you can not claim your interest payments to the property loan.

The benefit of deduction under section 80C also extends to repayment of loan taken for the construction of a house. Expenses incurred for transfer of the property in your name payment, such as stamp duty and registration, can also be claimed as legitimate tax deduction.