8 Tax-Free Transactions related to Real Estate

Real estate is one of the best investments that would fetch you the maximum in the long term. Return benefits are taxable – we all know. However, do you know that certain real estate-related transactions are tax-free as per Indian income tax law? Here are some listings of such transactions.

Return from Agriculture

As per Section 10(1) of the Income Tax (I-T) Act, any agricultural income from agricultural land, including farmhouses income (subject to specifications in Section 2(1A)) is exempt from tax pay.

Compulsory Urban Agricultural Land Acquisition Scenario

In case if the government has acquired your land for any urban development project, you are exempt from paying tax on the compensation that you have got for your possession as per Section 10(37). This has a clause that compensation was received on or after 01 April 2004 and the land was used for an agricultural purpose for two years before the date of transfer of land.

Income From HUFFamily Estate

Any income from the Hindu Undivided Family (HUF) impartible estate is tax exempted. A HUF may include members and extended family members.

Loan Against Property

Have you heard of reverse mortgage concept? It is when you avail loan against your property to fulfill your other requirements at the time crisis. Banks provide loans against the mortgage of the property. The payment is made either in installments, in a bulk amount, or both at a fixed rate of interest. Such loan amounts are not taxable as per theSection 47(XVI) of the I-T Act.

Value of a Palace

If you have the privilege of owning a palace then according to Section 10(19A), the annual value of “one palace in the occupation of a former ruler” will be exempt from tax. If you are lucky enough to own more than one palace, then the rest of the property will be taxable.

Charitable trusts and religious Institutions Income

Income of all such establishments is exempt from tax under Section 10(23C)(IV) and Section 10(23C)(V). The clause here is that such institutions require the approval of authorities for such institutions. The Central Board of Direct Taxes authorised I-T commissioners to approve such institutions for availing tax benefits under the two sections.

Real Estate Investment Trust Income where the profit a real estate investment trust (REIT) earns directly by renting or leasing property (Section 10(23FCA)).
Capital gain of a co-operative society that is formed to promote the interests of SCs/ST (Section 10(26B)).

Enjoys all these tax benefits while filing for I-T return this year.

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