New Delhi: Investors in the real estate sector can maximise their returns by resorting to specifically designed income tax tools like depreciation deductions and passive income laws, experts say.
However, those investing in the real estate sector shall be aware of additional tax-saving options, such as using self-directed retirement funds, maximising deductions for upkeep and repair charges, or capitalising on the advantages of having real estate professional accreditation.
Director of Motia Group LC Mittal says, “To effectively capitalise on these opportunities, due to the complexity of the tax law, it is essential to engage closely with competent tax specialists that specialise in real estate.”
Real estate experts say that depreciation is one of the most advantageous tax strategies for real estate investors. “Depreciation is the idea when assets, including properties, lose value over a period of time. Investors can deduct a certain amount of this value loss as an expenditure on their tax returns, lowering their total taxable income. Real estate investors may dramatically reduce their tax obligation by correctly using depreciation deductions, enabling them to continue to keep more of their earnings,” said another expert.
Experts say that real estate sector is one of the dominant sectors for growth prospects for a growing country like India. “Investment in raw / agriculture land is always a first choice for the investors as there is no tax for the sale of agricultural land. Capital Gain tax as per Indian Income Tax Act would not attract to the agricultural land as it does not fall under the definition of Capital Assets as per section 54 of IT Act,” an Income Tax expert said.
There is a defined period of investment in real estate properties for saving or getting the exemption of capital gain taxes in India under section 54 or 54F of the Income Tax Act 1961, he added.
Further for generating passive income also, agriculture land has become the sweetener for the investor as there are new options coming up like, organic farming, fractional holdings, and assured rental from community farming!
