6 Ways To Save On Your Income Tax In 2024-25.

Investing in real estate is a significant financial decision. Knowing how to reduce income taxes will improve your financial wellbeing. In India’s changing tax environment, effective tax-saving strategies ensure compliance while minimizing your tax liability. Here are six ways to reduce your income tax in the financial year 2024-25.

1. Leverage Home Loan Benefits (Section 80C and 24(b)):

Home loans are an excellent tax-saving tool. Section 80C offers a deduction up to ₹1.5 lakh on principal repayment. This applies to self-occupied, let-out, and under-construction properties. Section 24(b) allows a deduction of up to ₹2 lakh on interest for self-occupied properties. For let-out properties, there’s no limit. Keep certificates of principal and interest repayment to claim these deductions.

2. Utilize Deductions for Rental Income:

Rental income is taxable, but several expenses are deductible. Property tax payments reduce the taxable rental income. A 30% standard deduction is available for repairs and maintenance. For example, if your rental income is ₹6 lakh and you pay ₹50,000 in property taxes, the net income is ₹5.5 lakh. After applying the 30% deduction, your taxable income drops to ₹3.85 lakh. This helps maximize savings.

3. Invest in Real Estate for Long-Term Capital Gains Benefits:

Real estate investments can attract capital gains tax. However, holding a property for more than two years reduces the tax burden. Long-term capital gains (LTCG) are taxed at 20% with indexation. This adjusts the purchase price for inflation, reducing the taxable gain. You can also reinvest the capital gains into another residential property (Section 54) or specific bonds (Section 54EC) to avoid paying tax.

4. Claim Tax Benefits on Joint Ownership:

Joint property ownership doubles the tax benefits. If both owners contribute to the home loan, they can each claim deductions. Under Section 24(b), each can claim up to ₹2 lakh on interest. Under Section 80C, each can claim up to ₹1.5 lakh on principal repayment. Joint ownership is an attractive strategy for couples or business partners.

5. Utilize Sections 80EE and 80EEA for New Home Buyers:

How to reduce income taxes also applies to first-time homebuyers. Section 80EE offers an additional ₹50,000 deduction on interest if the loan amount is under ₹35 lakh, and the property value is under ₹50 lakh. Section 80EEA offers a ₹1.5 lakh deduction for affordable housing, subject to specific conditions. These deductions reduce your overall tax liability and encourage homeownership.

6. Use House Rent Allowance (HRA) Effectively:

If you live in a rented house and your salary includes HRA, you can claim a deduction under Section 10(13A). The deduction depends on factors like rent paid, salary, and city of residence. HRA can be claimed even if you own property in another city. This is especially useful for salaried professionals.

Conclusion:

How to reduce income taxes for real estate investors and homeowners is vital for long-term success. Leveraging home loan benefits, reducing rental income taxes, and capital gains tax strategies will reduce your tax liability. Understanding and applying these deductions will help manage your real estate investments efficiently. Informed investors make better decisions, ensuring the growth and sustainability of their real estate portfolios.

Contact Dhurva Realty for Property Investments in India or UAE

Looking to buy property in India or the UAE? Dhurva Realty can guide you through the process. We help you make informed investment decisions, minimize taxes, and maximize returns. Contact Dhurva Realty for expert advice on properties in India and the UAE.