Buying property in Faridabad, like any other part of India, comes with various taxes and financial responsibilities. However, there are several ways in which property buyers can save on taxes and reduce the financial burden. In this article, we will explore some valuable tips for property buyers in Faridabad to save on taxes, while making smart and informed decisions during the property transaction process.
1. Understanding Stamp Duty and Registration Charges
Stamp duty is one of the most significant taxes involved in property transactions in Faridabad. It is paid on the total value of the property or the transaction value, whichever is higher. The stamp duty rate in Haryana, including Faridabad, typically ranges from 5% to 7% of the property’s sale price, depending on factors such as property type and location.
To save on stamp duty, one option is to ensure that the sale deed accurately reflects the correct value of the property. Some buyers try to undervalue their property to reduce stamp duty, but this can lead to legal issues later on, and may even result in penalties if discovered by authorities. It is crucial to have a transparent and truthful agreement to avoid such problems. Additionally, some states offer a lower stamp duty for women buyers, so if you are purchasing property as a woman, you could be eligible for discounts.
When registering the property, make sure to consult the sub-registrar office for any applicable exemptions or discounts, as some government schemes and discounts could reduce the financial burden during registration.
2. Take Advantage of Tax Deductions Under Section 80C
When buying property, especially for residential purposes, there are several tax-saving opportunities under the Income Tax Act. For instance, Section 80C offers deductions on principal repayment for home loans. If you are taking out a home loan to buy property in Faridabad, you can claim tax deductions on the principal repayment amount under this section.
The maximum amount eligible for tax deduction under Section 80C is ₹1.5 lakh annually. By using this provision, property buyers can save a significant amount on their taxable income each year, lowering the overall tax liability. This is particularly beneficial for first-time homebuyers.
3. Home Loan Interest Deduction Under Section 24(b)
One of the most beneficial tax-saving options for property buyers in Faridabad is the home loan interest deduction under Section 24(b) of the Income Tax Act. If you have taken a loan to purchase property, you can claim a deduction of up to ₹2 lakh per year on the interest paid on the loan.
This deduction can be claimed whether the property is self-occupied or rented out. The amount saved from the tax deduction on home loan interest can help offset the cost of monthly EMI payments, making it easier for buyers to manage their finances.
4. Claim Benefits on Rent Paid
If you are buying property for investment purposes and renting it out, you can claim deductions under Section 24(b) for the interest paid on the home loan as well. This is applicable if the rental property generates income. You can deduct the home loan interest, property taxes, and other expenses related to property maintenance from the rental income, which can help reduce your taxable income.
Furthermore, if you live in a rented accommodation and are also buying a property in Faridabad, you may qualify for the House Rent Allowance (HRA) exemption under Section 10(13A). By claiming HRA along with other exemptions, you can save a substantial amount of tax.
5. Consider the Right Property Location
The location of the property plays an important role in determining the tax obligations. Properties in Faridabad’s well-developed and high-demand areas, such as sectors close to the metro line or the commercial hubs, may have higher stamp duty and property taxes due to their high value.
If saving on taxes is a priority for you, consider purchasing property in emerging or less expensive areas of Faridabad, where the stamp duty and property taxes could be lower. These properties might also offer higher future appreciation potential, allowing you to make a profitable investment while paying lower taxes initially.
6. Opt for Property in Joint Ownership
Joint ownership of property is another way to save on taxes. If you purchase property jointly with a family member, such as a spouse, both of you can claim tax deductions individually. This can help reduce the tax burden as both owners can benefit from deductions related to home loan principal and interest repayment. Additionally, joint ownership may allow you to split the overall cost of the property, further reducing individual expenses.
Conclusion: Property Buyers in Faridabad
Buying property in Faridabad can be an exciting and rewarding investment. However, it is essential to be aware of the taxes involved in the property buying process. By following these tips, you can ensure that you save on taxes while making a smart and informed purchase. From understanding stamp duty to utilizing home loan deductions and considering joint ownership, there are several ways to reduce the financial load of buying property. Always consult a tax professional or real estate expert to ensure that you are making the most of the available tax-saving opportunities in Faridabad’s real estate market.
