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Investment in real estate has become lucrative in
view of the continued demand-supply mismatch and cumulative yield on
investment across the city. Moreover the federal government has been
consecutively encouraging people to invest in housing through fiscal
sops and the efforts have started yielding results with more number
of people entering housing as an investment option. This has
resulted in rental housing for people who cannot otherwise afford
their own homes now.
Yet another factor is the spurt in input cost and any delay in
acquiring homes is becoming dearer year after year. Besides end
users, it makes sense for investors to allocate a portion of their
investment portfolio in residential or commercial property. The
yield on residential property range from 5 to 7 per cent per annum
depending on the location and type of property whereas it is 9 - 11
per cent for commercial property.
A plethora of tax incentives makes buying and selling in real estate
a viable investment proposition if investors resort to proper tax
planning. Here are a few tips on tax planning in the realm of buying
and selling real estate.
One self-occupied house is completely exempt from income tax and
wealth tax irrespective of the value of the property.
It is necessary to take into consideration the size of the family,
age of family members, impact of income tax and wealth tax on family
members before plunging into real estate investment on family
members' name.
In the case of joint investment, it should be ensured that each
co-owner must invest in the immovable property out of his own funds
or borrowings in the ratio of his ownership of the property.
Moreover, it is advisable to ensure that the number of property
holders should be more in the family so that each family member has
separate property in his or her own name and thus separate taxable
income from the property if given on rent.
If a residential property is let out for more than 300 days in a
year, it is completely exempt from wealth tax.
Commercial property is completely exempt from wealth tax whether it
is used for one's own business or profession or bought as an
investor. For NRIs while repatriation is restricted to two
residential properties, there is no limit on the number of
commercial properties.
If an NRI or a resident Indian is the owner of only one house
property or a plot of land up to 500 sq mts, he would be exempt from
wealth tax.
Open land for development purposes would be exempt from tax for a
period of ten years.
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