“Unlock Tax Savings! Explore how strategic investments in under construction properties can lead to substantial benefits, including lower interest expenses, advantageous market values, and tax exemptions under Sections 24 and 80C of the Income Tax Act. Invest wisely for a tax-efficient future!”
For individuals with income below Rs. 5 lakh, strategic investments in under construction properties can pave the way for substantial tax savings in the future. This article explores how such investments can lead to significant benefits, including lower interest expenses, advantageous market values, and tax exemptions under Sections 24 and 80C of the Income Tax Act, 1962.
If your income falls within Rs. 5 Lakh and you are expecting your income to be greater than this amount later in future then it is the best time for you to invest in an under construction property as it can provide you benefits in many ways.
Do you know you can save upto 20%-30% by investing in under construction property by saving interest expenses on loan amount and taking advantage of lower market value now and also save your taxes in future?
Let’s take a look how.
As per Section 24 of Income Tax Act 1962, one can claim deduction of Rs. 30,000 or Rs. 2,00,000, as the case may be, only when the construction of the property is complete.
Under Section 80C of the Income Tax Act, a borrower can claim tax exemption on the payments made towards stamp duty, registration charges and repayment of principle amount of housing loan. However, once again, one can claim these deductions only after the construction of the property is complete.
Now suppose, Mr. Ram earns Rs. 5 lakh p.a. in the year 2020 and thus his tax liability is nil. He tactfully saves money and invests in an under construction property, possession of which is expected to be in the year 2025.
He also took a home loan for which he is not required to pay interest on the whole amount today but has to pay interest as and when the slab gets completed and the loan amount is disbursed. Thus resulting in lower Interest expenses incurred by him on a property of which market value in future is expected to rise.
He also expects that his income will be more than Rs. 5 lakh by that time and thus he will incur tax liability in future.
As Mr. Ram can take benefits of Section 24 and Section 80C of Income Tax Act, 1962 only on completion of property in the year 2025, investing in under construction property can be proved more beneficial for him.
This is because in 2025 when the construction will be complete his income would also be more than the basic exemption limit and he can take advantage of Section 80C upto Rs. 1,50,000 and Section 24 upto Rs. 30,000 or Rs. 2,00,000, as the case may be, in the year in which he becomes liable to tax and claiming these deductions can lead to substantial amount of tax saving by him.
Thus if you have just started your professional journey and falls within basic exemption limit then investing in under construction property will definitely prove to be the best choice you will ever make.
Conclusion: For individuals embarking on their professional journey within the basic exemption limit, investing in under construction properties emerges as a strategic and tax-efficient choice. This approach aligns with future income growth, allowing for optimal utilization of tax-saving provisions under the Income Tax Act. Consider this insightful strategy to maximize your tax savings in the long run.
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