Budget 2024: Capitalmind CEO Deepak Shenoy emphasizes continued tax advantages of real estate

Budget 2024: Amidst concerns over significant revisions to capital gains taxation, Deepak Shenoy, CEO of Capitalmind, has reassured investors that real estate continues to offer significant tax advantages, making it a highly favourable asset class.

In a post on X (formerly Twitter), Shenoy highlighted the unique benefits of saving on long-term capital gains tax by reinvesting gains into a house and the ability to offset principal and interest payments on home loans against salary under Sections 80C and 24 of the Income Tax Act.

Shenoy also noted that home loans typically have the lowest interest rates than business loans or loans against shares, further enhancing their appeal. Moreover, rental income from homes benefits from a 30 per cent standard deduction, with only the remaining amount taxed, unlike income from other assets, such as dividends from shares, which are fully taxed. While acknowledging a slight tax increase for some, Shenoy emphasized that real estate remains a “pampered asset class” due to these substantial tax advantages.

Here is what Shenoy tweeted:

"Don't worry about Real Estate. It continues to get super advantages in so many ways:

• You can invest long-term gains in ANY asset into a house and save LTCG tax (no other asset class has this)
• You get to offset principal against salary (80C)
• You get to offset interest against salary (24)
•  You get the lowest interest rates on home loans (versus business or loan against shares or such)
•  Rental income from homes is 30 per cent off, no questions asked (only the rest is taxed). For any other asset, any income generated is fully taxed (like dividends for shares).

“So yes, one tiny little tax might have gone up for a few people in RE, but real estate is one pampered asset class regardless,” Shenoy said.

What was announced in Budget 2024?

Starting this year, homeowners planning to sell their properties may face higher taxes due to a significant change announced in Budget 2024. The removal of the indexation benefit, which previously helped adjust the purchase price of a property for inflation, will no longer be available. Indexation is a method that adjusts the original purchase price to account for inflation over the years, thereby reducing the taxable capital gains – the profit earned from the asset's sale. Considering inflation, this adjustment helps to reflect the true value of the property. With the elimination of this benefit, sellers may now find themselves paying more tax on the gains from property sales.