• Purchasing a house in India can be advantageous from a tax-saving viewpoint. Indeed, investing in real estate offers promising returns over time. Nevertheless, to unlock all the benefits, it is essential to plan your real estate investment carefully. Only if you do so can you make knowledgeable choices and maximize your tax savings. That being said, if you are curious about how buying a home can help you save on taxes, this guide is meant for you! Continue reading to learn about tax advantages, tax savings, and GST savings related to your upcoming property acquisition.

Tax Advantages of Buying Property

Outlined below are three income tax advantages of acquiring a new property. If you have been contemplating how to reduce tax on property purchases, here’s how!

1. Income tax savings on home loans
   Tax advantages on home loans are offered under section 24, section 80C, and section 80EE of the Income Tax Act, 1961. To claim the tax advantage for a home loan, you must meet one crucial criterion shared by all the income tax sections.
   You need to be the holder of both title deeds, meaning the owner of the house/property along with being the borrower of the loan for the property. Merely having ownership or being a loan borrower on its own will not yield these benefits. For example, if you plan to buy a property in your wife’s name and pay the EMI from your earnings, you will not be eligible for any tax benefits.
   
2. Income tax deduction for repayment of the home loan principal
   You can claim a deduction for principal repayment only after the property’s construction is complete, as stipulated by Section 80C. For instance, if the relevant authority issued the construction completion certificate in March 2021, then the principal amount repaid during the financial year 2020-21 can be entirely claimed in the income tax return for that year, up to ₹1,50,000.
   However, any principal repayment made before FY 2020-21 cannot be included in the return submitted for FY 2020-21. The deduction is also applicable solely for the repayment of a loan taken to buy or build residential property. Therefore, principal repayment for a loan taken for alterations, renovations, or repairs is not eligible for a deduction under section 80C.
   
3. Income tax deduction for home loan interest
   You can claim a tax benefit for the interest paid on the home loan during both the pre-construction and post-construction phases. The deduction for interest paid on the home loan is claimable under Section 24(b) of the Income Tax Act 1961.
   Interest is categorized into two types: Pre-construction/Acquisition and post-construction/Acquisition. Interest during the pre-construction period starts from the borrowing date and ends on the 31st of March, just prior to the completion date or loan repayment date, whichever comes first. Interest for the post-construction period begins following the completion of construction.
   
4. Income tax deduction for first-time homebuyers
   An individual receives an additional tax benefit of ₹50,000 for interest paid on a home loan. This deduction is provided in addition to the interest deduction available under section 80EE. To qualify for these benefits, you must be purchasing your first home, and the loan amount should not exceed ₹35 lakh. Furthermore, the property value must not exceed ₹50 lakhs.
   
5. Income tax benefit on stamp duty and registration charges
   You are eligible to claim the stamp duty and registration charges paid at the time of a home purchase under section 80C up to ₹1,50,000. These benefits can be claimed at any time within the year of payment, regardless of whether a loan has been obtained or deducted.
   
   How to Save Tax on Property Purchase?
   
   Although real estate has traditionally offered significant long-term returns, most buyers prefer not to incur property purchase tax. There are a few smart strategies to at least reduce the tax burden, even if the taxes cannot be entirely eliminated. Here’s how to save tax on property purchase.
   
6. Try Investing in Multiple Tax-Saving Instruments
   To decrease your taxable income, think about investing in a range of tax-saving products such as the National Savings Certificate (NSC), Public Provident Fund (PPF), and Equity-Linked Savings Scheme (ELSS).
   
7. Using a Home Loan to Reduce Tax
   You can reduce your income tax by utilizing a home loan to acquire property. If you satisfy the eligibility criteria, you can claim income tax deductions on both the principal and interest amounts under Sections 24, 80C, and 80EE of the Income Tax Act.
   Moreover, if you obtain a joint loan, each borrower may deduct up to ₹1,50,000 from the principal and up to ₹2,00,000 from the interest paid within a given financial year.
   If you have a home insurance policy and now wish to apply for a home loan, you can do so without any complications. Having property insurance simplifies the home loan application process.
   
8. Stamp Duty Refund
   The tax applicable on the sale agreement, either before or on the day of property registration, is referred to as the stamp duty. Paying this stamp duty is necessary to legitimize the property purchase. While stamp duty rates differ from state to state in India, it is typically around 5% of the total property cost, applying to both under-construction and ready-to-move-in properties.
   Bonus: Registering the property in a woman’s name is one of the best ways to receive a 2% stamp duty discount. This tax rebate is currently available in several states, including Delhi, Haryana, Punjab, and Rajasthan.