6 Tax Free Transactions in Real Estate
Oct 26, 2017 Home Trading Steps
Who does not want to earn money? And investing in real estate is one of the lucrative options. However, investing in real estate also means shelling out lots of money to pay taxes as well. But what about some real estate income that can go tax free? Want to know what are those? Read through to know:
Income through agricultural income: If you are earning through agricultural income then you are free from paying tax for that income under Section 10(1) of the Income Tax (I-T) Act. In order to claim the benefit, you have to prove that the profit you have earned is by using the land for agricultural purpose only that includes processing agricultural production. Also, income through farmhouses is also considered under agricultural income but there are certain conditions under Section 2(1A) of the Act that you need to fulfill.
With the increase in infrastructural developments, governments tend to acquire land from farmers. Ideally, people have to pay capital gains tax on the sale of their property but if you have farm land then under Section 10(37) of the I-T Act, the compensation received from the Government will get exempted from tax. But there are two conditions that need to be fulfilled in such cases:
1) The land must be under use for the agricultural purpose for two years, prior to the transfer date.
2) The compensation should be received on or after April 1, 2004.
Income from the family property: if you have shared in the family ancestral property then also you are not liable to pay taxes for the income that gets generated due to that property. In case of Hindu Undivided Family (HUF), the income generated from the property gets exempted under Section 10(2).
Reverse Mortgage: We usually invest or buy property at a younger age to secure our older age. So here comes Reverse Mortgage, wherein you can mortgage your property in order to earn a monthly income. So, Section 47(XVI) of the I-T Act states that as a borrower you do not need to pay tax for the amount you receive as the loan.
If you own a multiple properties then you do not have to pay taxes for the first property, you pay tax for the second property. For instance, if we take the case of royals who usually own more than one property, then the tax for annual value of a palace is exempted under Section 10(19A). But he has to pay tax for his other properties.
Real Estate Investment Trusts (REITs): Although these are not that popular in India, but REITs is actually tax free. The income that is generated gets exempted from taxes under Section 10(23FCA).
Income through agricultural income: If you are earning through agricultural income then you are free from paying tax for that income under Section 10(1) of the Income Tax (I-T) Act. In order to claim the benefit, you have to prove that the profit you have earned is by using the land for agricultural purpose only that includes processing agricultural production. Also, income through farmhouses is also considered under agricultural income but there are certain conditions under Section 2(1A) of the Act that you need to fulfill.
With the increase in infrastructural developments, governments tend to acquire land from farmers. Ideally, people have to pay capital gains tax on the sale of their property but if you have farm land then under Section 10(37) of the I-T Act, the compensation received from the Government will get exempted from tax. But there are two conditions that need to be fulfilled in such cases:
1) The land must be under use for the agricultural purpose for two years, prior to the transfer date.
2) The compensation should be received on or after April 1, 2004.
Income from the family property: if you have shared in the family ancestral property then also you are not liable to pay taxes for the income that gets generated due to that property. In case of Hindu Undivided Family (HUF), the income generated from the property gets exempted under Section 10(2).
Reverse Mortgage: We usually invest or buy property at a younger age to secure our older age. So here comes Reverse Mortgage, wherein you can mortgage your property in order to earn a monthly income. So, Section 47(XVI) of the I-T Act states that as a borrower you do not need to pay tax for the amount you receive as the loan.
If you own a multiple properties then you do not have to pay taxes for the first property, you pay tax for the second property. For instance, if we take the case of royals who usually own more than one property, then the tax for annual value of a palace is exempted under Section 10(19A). But he has to pay tax for his other properties.
Real Estate Investment Trusts (REITs): Although these are not that popular in India, but REITs is actually tax free. The income that is generated gets exempted from taxes under Section 10(23FCA).
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