India’s real estate sector, which currently contributes nearly 7.3% to the GDP, is expected to grow further due to government actions, infrastructure spending, lower housing costs, and rising demand. For investors, these changes are opening up new opportunities. These opportunities exist within emerging as well as established markets.
As the real estate landscape evolves, it is necessary to stay updated with tax rules as well as strategies to maximise returns and also minimise liabilities. Let us explore the key tax considerations, also the new allowances and smart strategies for investment into real estate.
Also Read: Post-Budget Implications for Real Estate Market: Stocks & REITs
Deductions and exemptions on home loans
In 2025, real estate taxation in India may become more investor-friendly, offering greater tax benefits for real estate investors through key updates.
- Section 24b: According to Section 24b, an individual can claim an allowance of maximum ₹2 lakh in a year for the interest on mortgage for an owner-occupied house, which lowers the expense of property ownership.
- Section 80C: Under Section 80C, you can deduct up to ₹1.5 lakh yearly for the capital repaid on your mortgage, which can be combined with other tax-saving investments.
- Section 80EEA: First-time homebuyers get an additional allowance of up to ₹1.5 lakh per year on the interest of mortgage under Section 80EEA for loans sanctioned between April 1, 2019, and March 31, 2022 and can hence claim up to a maximum amount of ₹3.5 lakh of interest yearly if they are eligible.
- Section 23: You can now claim zero yearly value for up to two owner-occupied properties under Section 23, which means no tax on notional rent for the second property and can result in tax savings of up to ₹1.8 lakh per annum for some individuals.
- Section 26: In the case of joint ownership, each co-owner and co-borrower can claim these allowances individually under Section 26.
Rental income and TDS updates
Understanding tax on rental income in India is crucial for property owners seeking to maximise tax benefits for real estate investors under the evolving real estate taxation in India.
- TDS on rental income has been increased from ₹2.4 lakh to ₹6 lakh per annum, so smaller landlords especially in metros and big cities will have an easier time and lesser tax burden.
- No deemed rental income on second owner-occupied property, so those having multiple homes will have a lesser tax liability and more investment in residential real estate.
- Vacant properties will continue to be taxed on expected rental value and not on actual rent received, so plan accordingly to avoid tax outflow.
- Also, property owners can get a 30% standard allowance on net rental income and allowance on council tax and mortgage interest, so rental income is more tax-efficient than ever before.
Must Read: TDS on Rent – Section 194IB of Income Tax Act
Expense tracking and advanced tax strategies
Accurate expense tracking is essential under real estate taxation in India, enabling investors to maximise tax benefits for real estate investors in 2025 by ensuring all eligible allowances are properly claimed.
- Keeping thorough records of utility bills, council taxes, loan interest, and administrative costs ensures that all allowances eligible as allowance are availed, reducing taxable income.
- Changing the date of a property sale to a date after April 1, 2025, can help investors postpone the payment of the capital gains tax to the next financial year and also provide better tax management in advance.
- Investors can also take advantage of the reinvestment exemptions under Sections 54 and 54EC, with higher caps on capital gains bonds, to further reduce tax liability when they reinvest the profits.
- Investments made through REITs and fractional ownership aim to enhance tax efficiency by offering pass-through benefits and shared allowance .
- A good year-end tax planning tick list should cover the following items: going overall allowance , keeping the records, planning the sales, and consulting your tax adviser to make sure you comply and maximise the savings.
Also Read: Section 194IA: Tax on Immovable Property Transactions
Capital gains tax
Capital gain real estate taxation in India has undergone major changes effective from July 23, 2024.
- Until July 23, 2024, short-term capital gains (STCG) on property—property held for 36 months or less—were taxed at the income tax slab rate of the individual, while long-term capital gains(LTCG) on property held for more than 36 months were taxable at 20% with indexation so that inflation adjustment can assist in reducing tax load.
- On the other hand, for the properties received after July 23, 2024, STCG will still be taxed at the individual’s income tax slab rate, while LTCG will be charged at a fixed rate of 12.5% without indexation, so you will be able to calculate the gains only on the amount paid without any inflation adjustment.
| Capital Gains Type | Pre-July 23, 2024 Regime | Post-July 23, 2024 Regime |
| Short-Term Capital Gains (STCG) | Held for 36 months or less, slab rate | Held for 24 months or less, slab rate. |
| Long-Term Capital Gains (LTCG) | Held for more than 36 months, 20% with indexation. | Held for more than 24 months, 12.5% without indexation. |
Tax on capital gains from Joint Development Agreements is postponed until project completion, providing cash flow relief for landowners and developers under Section 45(5A) of the Income Tax Act.
Conclusion
Understanding the 2025 tax reforms is crucial for real estate investors who are after savings and returns. Major changes such as increased exemption limits, new deductions and simplified capital gains regulations create the possibility of more efficient use of taxes.
Getting rid of properties at the right time, carefully recording expenses, and getting advice from specialists are some of the ways to make sure that one complies with the rules and pays the lowest possible fines.
Keeping abreast of tax changes enables investors to be more strategic in their decisions. With a well-planned strategy, property owners can take full advantage of tax incentives and get closer to achieving their financial goals in India’s real estate market.
FAQs
Income earned from renting properties in India is subject to tax under the “Income from House Property” category. If you have a mortgage, you can claim the interest portion, and you can also deduct any council tax you’ve paid. The net rental income after tax is then combined with your total income and taxed according to the new income tax slabs for Financial year 2025-26.
In 2025, rent earnings in India are exempt from tax if the sum of your total taxable income, after all the eligible allowance, is below ₹12 lakh as per the new tax regime. Through the effective use of rebates, and setting off allowance such as council taxes or mortgage interest, a lot of property owners can substantially reduce or even cancel out their tax liability on rental income, thus making the most of their post-tax returns.
According to the latest Budget announcement, rent payments up to ₹6 lakh per annum are exempt from TDS for FY 2025-26. To put it simply, if your rental income from a property is less than ₹6 lakh for the whole year, the tenant will not deduct any TDS from you, thus, compliance will be easier for small landlords. The new limit has been introduced to reduce the number of property owners required to file returns and lighten their tax burden.
Investors in Indian real estate can push back their capital gains taxes by selling their property after April 1, 2025. This move shifts the tax burden to the next financial year, allowing property sellers ample time to consider and invest in tax-saving options. These options include reinvesting the money into new assets under Sections 54 or 54EC. This approach improves cash flow and allows more time to develop an effective tax strategy.
Buying real estate in India can unlock several tax advantages. Section 24(b) allows you to deduct from your taxable income the interest on your mortgage of up to Rs 2 lakh per annum and Section 80C lets you set off up to Rs 1.5 lakh on the principal. Rental properties are eligible for a standard 30% allowance on net rental income, in addition to council tax allowance. Capital gains exclusions such as Sections 54 and 54EC provide the opportunity for tax relief on the amount of sale proceeds that are reinvested.
