If you are planning to buy a house in Mohali, the first couple of things you’d want to be sorted would be registry and the property tax. There’s no getting around the fact that you have to pay property tax to MC Mohali, but you can certainly save taxes by investing in property. To encourage property buyers to invest in real estate and save taxes, the Government of India has introduced several measures. Here are few tips that can help save taxes when you invest in a property in Mohali.
Invest in a Second property
To save money, tax experts suggest that you invest in a second property. But keep in mind that the second property must not be for self-occupation but for renting. Do note here that you are not limited to residential properties in Mohali but also commercial. When you invest in second property, you get tax exemption for the interest on the loan, that too without an upper limit. Also, if more than one person is availing the loan for the purchase, then all borrowers are eligible for exemption on interest.
Exemption for Long-Term Capital Gains
Capital gains are profits derived from selling capital assets such as real estate, stocks or bonds. Any property held for 3 years or less, when sold at a profit, will attract tax under Short-Term Capital Gains (STCG). The profit from the sale would be added to your income and taxed as per the tax bracket you fall under. But the tax department allows an exemption for long term capital gains. Although, one would still be required to pay tax on property sold under the Long Term Capital Gains (LTCG). But as the profits from LTCG are huge, there are provisions to reduce the tax burden. One way to obtain tax exemption is to reinvest capital gains in other capital assets. This should be done under a specific period i.e. within one to three years. So, you have an opportunity to sell your property in Mohali at a profit and invest it in another upcoming real estate project. Although you will be paying property tax to MC Mohali, you will be saving money on Long Term Capital Gains.
Tax Exemption on a Home Loan
For first-time home buyers, both payment of interest and repayment of principal amount are eligible for tax exemptions. You can claim a deduction of up to Rs 1,50,000 under Section 80C for repayment of principal amount. This benefit can be availed immaterial of the fact that the property is self-occupied or has been let out on rent.
For the payment of interest, you can avail deduction under Section 24(b). The deduction limit on interest payment for a home loan for a self-occupied property is Rs 2 lakh. However, if the property has been let out on rent, then the actual interest paid can be claimed as deduction under the section without any maximum limit. This deduction applies even if you have taken two home loans for two different properties, with one being self-occupied and other being let out on rent.
Utilize the aforementioned tips to save money through tax exemptions when you purchase property in Mohali.