Real estate has been a hot investment avenue in India, not only for wealth creation but also for its substantial tax-saving benefits for the learned buyers. If you are planning to buy property in Chennai, you can save on property tax in many ways by taking advantage of exemptions, deductions, and other tax-saving methods. With proper planning, Chennai real estate can become a profitable venture, allowing you to save on tax while building long-term assets.
The Indian government actively encourages investments in real estate through various tax incentives and schemes, including deductions under the Income Tax Act, exemptions on capital gains, and benefits for homebuyers and developers. In this blog, we have explained how to save on property taxes and provided practical tips and strategies to reduce your tax liability while investing in real estate.
Whether you're purchasing a home for personal use or as an investment, the Income Tax Act exemptions allow you to claim various deductions that can significantly reduce your tax burden. Key advantages of real estate investments for tax-saving
Let us look into it in more detail in the coming sections. But before going into the legal aspects of it, here are a couple of quick tips on saving tax.
If the property sold is a residential house, reinvesting the gains into another residential property within a specified time (1 year before or 2 years after the sale, or within 3 years if constructing) can help you claim exemption under Section 54.
If the land qualifies as a long-term capital asset (held for more than 2 years), you can save tax by reinvesting the sale proceeds under Section 54F. This section allows exemption from capital gains tax.
Property tax savings can be done in several ways. Here is how to do it.
Under Section 80C of the Income Tax Act, individuals can claim tax deductions on the principal repayment of home loans. Under this Act, you can save on property taxes for both self-occupied and rented properties.
The maximum claimable limit under Section 80C is ₹1.5 lakh per financial year.
If you're a first-time homebuyer, reaching out to trusted developers like OmShakthy Homes will help understand available tax benefits and how to claim deductions. The table below explains how to save money on property taxes from additional tax deductions under Section 80EE, Section 80EEA of the Income Tax Act, and additional deductions for first-time homebuyers.
| Section | Tax Benefit | Conditon | 80C | Up to ₹1.5 lakh on principal + stamp duty & registration | Property not sold within 5 years |
|---|---|---|
| 24(b) | Up to ₹2 lakh on interest (self-occupied) | Construction within 5 years; else only ₹30,000 allowed |
| 80EE | Extra ₹50,000 interest deduction for first-time buyers | Loan ≤ ₹35 lakh; property ≤ ₹45 lakh |
| Joint Loan | Each applicant: ₹2 lakh (interest) + ₹1.5 lakh (principal) | All must be co-owners |
| Second Home | Full interest deduction | Treated as let-out; no cap |
1. Section 54 allows exemption if the gains are reinvested in another residential property in India within one year before or two years after the sale, or if a new house is constructed within three years.
For instance, Person A sells his house for a gain of ₹40 lakh and buys a new house worth ₹35 lakh. He can save money on property taxes for ₹35 lakh under Section 54.
2. Section 54EC provides an exemption if the capital gains are invested within six months of the sale.
For example, person A invests ₹50 lakh capital gain in REC bonds within six months and claims full exemption under Section 54EC.
To transfer property to a Hindu Undivided Family (HUF) structure, family members can execute a gift deed that is duly stamped and registered.
Always ensure the CTS number of the property shown online matches the one in your sale deed or patta. This prevents errors during property registration, tax payments, or resale.
You can check the CTS number online quickly and securely. Your property information is accurate and officially recorded with Tamil Nadu’s land administration portal.
If you prefer or need to verify property details without internet access, you can find your CTS number offline methods. Here’s a guide on how to check CTS number offline for your property.
In the current market, rental apartments and joining ownership are the best property investment in Chennai, in terms of tax savings. Home loan interest and principal repayment benefits can also be shared among co-owners, maximizing overall savings.
Do you know that you can also claim deductions on property manintenance? Here is how you can save on repairs of the property.
However, remember that specific repairs and maintenance costs that keep the property in a rentable condition are deductible. Not applied for structural changes or renovations.
Accurate records help substantiate claims for deductions, exemptions, and other tax benefits, while also providing transparency during audits. Ensure that all receipts, invoices, and agreements related to property ownership, income, and expenses are updated.inaccurate documentation can lead to penalties, interest charges, or legal proceedings.
Here is a quick go-through on ways you can save on tax in real estate in India.
Real estate is a sure-shot investment method to save on tax in India. There are home loan deductions, capital gains exemptions, and deductions for rental income. To fully maximize these benefits and ensure compliance with tax laws, it’s important to stay informed. Consult with a tax professional, legal expert, or trusted developers like OmShakthy Homes. We help our clients save maximum on tax while buying a property with us and ensure maximum returns.
For a second home, you can claim a deduction of up to ₹2 lakh on home loan interest under Section 24(b). However, if the property is self-occupied, only one property can claim the benefit of interest deduction.
Yes, you can claim tax deductions on the home loan interest paid during the construction period under Section 24(b).
Investing in REITs provides tax-efficient returns. The dividends from REITs are exempt from tax in the hands of the investor, and capital gains on the sale of REIT units are taxed at a lower rate of 10% for long-term gains.
Yes, under Section 54, you can claim tax exemptions on long-term capital gains if you reinvest the proceeds in a new residential property.
Stamp duty and registration fees can be claimed as part of the cost of acquisition when calculating capital gains on property sales. This amount can be added to the property’s cost base, reducing taxable capital gains.
