Budget 2024: Deepak Shenoy, CEO of Capitalmind, has reassured investors that real estate still offers major tax advantages, making it a highly favorable asset class, despite concerns over large changes to capital gains taxation.
Shenoy outlined the special advantages of avoiding long-term capital gains tax by reinvesting gains into a property in a post on X (formerly Twitter). She also discussed the opportunity to use Sections 80C and 24 of the Income Tax Act to offset principal and interest payments on home loans against salary.
Shenoy further pointed out that residential loans are more appealing because they usually have lower interest rates than company loans or loans secured by shares. Furthermore, unlike income from other assets, such as dividends from shares, which is completely taxed, rental income from residences is subject to a standard deduction of thirty percent, with only the remaining amount being subject to taxation. Shenoy said that despite a minor tax rise for certain individuals, real estate continues to be a “pampered asset class” because of these significant tax benefits.
What Shenoy tweeted is as follows:
Don’t stress over real estate. It keeps getting incredible benefits in a ton of ways:
- You can invest long-term gains from any asset into a home and save on LTCG tax (a benefit unique to real estate).
- You can offset the principal amount against your salary under Section 80C.
- You can also offset the interest payments against your salary under Section 24.
- When it comes to house loans, you have the best interest rates (compared to a company loan against shares or such).
- Rental income from properties is taxed at a 30% rate, with no further questions asked (only the remainder is taxed), while income from other assets, such as dividends from shares, is fully taxed.
Shenoy stated, “So yeah, one tiny little tax might have gone up for a few people in RE, but real estate is one pampered asset class regardless.”
What was announced in Budget 2024?
Starting this year, homeowners looking to sell their properties may encounter higher taxes due to a major change introduced in Budget 2024. The indexation benefit, which previously adjusted the purchase price of a property for inflation to reduce taxable capital gains, will be removed. Indexation helped adjust the original purchase price to account for inflation over the years, thus lowering the taxable profit from the asset’s sale. Without this adjustment, sellers may face increased taxes on the gains from property sales.
