Tax-Saving Tips for Property Investors: ITR Filing 2025
2025 is on the threshold, and also just three months are remaining for this financial year to end. As the fiscal year approaches close, everyone is thinking and planning ways to save as much tax as possible. Why should real estate investors and buyers be left behind? In this blog, we will talk about the ways you can save taxes, ofcourse legally, on your property.
How to Save Taxes on Property While Filing ITR in 2025?
There are several ways to save taxes on real estate, but each method has different rules and regulations that you need to meet. Let's talk about those ways to save taxes on your property:
1. Deducting Mortgage Interest
Under Section 24(b) of the Income Tax Act, you can deduct interest paid on home loans up to Rs. 2 lakh for a fiscal year. If the property has joint ownership, both owners can deduct interest paid on the home loan from their total taxable income in their ITR.
2. Deduction of Principal Repayment
You can also claim a deduction on the principal amount paid for your home loan, up to Rs. 1.5 lakh. Suppose you have taken a home loan of Rs. 50 lakh, with a principal repayment of Rs. 1.5 lakh and interest of Rs. 3 lakh per year.
Section 80C allows a maximum deduction of Rs. 1.5 lakh for various investments and expenses, including principal repayment of home loans. Since the principal repayment is Rs. 1.2 lakh, which is within the Rs. 1.5 lakh limit, you can claim the entire amount.
3. Deduction of Property Tax
You can also deduct property tax paid on your property, and a 30 percent standard deduction is allowed. So, if your property's GAV (Gross Annual Value) is Rs. 2.4 lakh (Rs. 20,000 x 12) and you have paid property tax of Rs. 24,000 for the same year, you can deduct Rs. 2.4 lakh - Rs. 24,000 = Rs. 2.16 lakh. Also, if your property is rented, you can avail yourself of the 30 percent standard deduction too.
Rs. 2.16 lakh - Rs. 64,800 = Rs. 1.5 lakh and Rs. 200 (taxable value).
But remember, all these deductions will be valid based on your GAV (rent coming from the property). If the owner is using the property themselves, the GAV is zero, and there will be no tax on it or deductions.
4. Deduction on Property’s Depreciation
A deduction on property depreciation is also allowed. You can deduct 5 percent on residential properties and 10 percent on commercial properties, as well as 10 percent on furniture and fittings.
So, suppose your property’s value is Rs. 50 lakh at the start of the fiscal year, you can claim Rs. 2.5 lakh from your property’s total value for residential property and Rs. 5 lakh for commercial property while filing your ITR.
5. Invest in Bonds (Exemption under 54EC)
You can also invest your income from long-term capital gains in certain bonds to exempt it from taxes. Suppose you earned Rs. 60 lakh from long-term capital gains. You can invest up to Rs. 50 lakh in bonds eligible for this investment, such as:
• National Highways Authority of India (NHAI)
• Rural Electrification Corporation (REC)
• Power Finance Corporation (PFC)
• Indian Railway Finance Corporation (IRFC)
Remember, you can only invest up to Rs. 50 lakh in these bonds, and the rest of the amount will be subject to taxes under your ITR.
6. More Ways to Save Taxes on Your LTCG
Reinvest in Residential Property (Section 54)
If you sell a house and make a profit, you can avoid paying tax on the profit by using it to buy another house within two years or build one within three years. This is allowed under Section 54, which gives an exemption from capital gains tax if you reinvest the gain in another residential property.
Invest in Capital Gains Account Scheme (Section 54F)
If you sell a house and make a profit, you can keep that profit in a Capital Gains Account Scheme. You must use this money to buy a new house within three years or keep it in the scheme for up to two years to avoid paying tax on the gain.
Invest in Tax-Saving Mutual Funds (ELSS)
Equity-Linked Saving Schemes (ELSS) are mutual funds that help you save taxes under Section 80C. You can invest up to Rs. 1.5 lakh each year in these funds to get tax benefits while also potentially earning higher returns on your money.
Offset with Short-Term Capital Losses
If you made a loss by selling other assets, you can use this loss to reduce the tax you owe on short-term capital gains. This means you can balance out the gains and losses to pay less tax.
Invest in National Pension System (NPS)
Contributions to the National Pension System (NPS) can save you tax under Section 80CCD(1B). You can invest up to Rs. 50,000 each year in the NPS and get extra tax savings on top of the Rs. 1.5 lakh under Section 80C.
Invest in Specific Infrastructure Bonds
You can also invest in infrastructure bonds issued by public sector companies. These bonds qualify for tax benefits under Section 54EC and help reduce the capital gains tax you would otherwise need to pay.
Conclusion
It is important to consolidate all your expenses and tally everything as per the norms to understand how much deduction you can opt for. All the ways specified in this blog can help you save a lot of tax on your property and real estate expenses.
Disclaimer: Always consult your CA or someone who is an expert in managing finances as per laws and regulations. The blog is written for educational purposes only.
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