Savings tax on a commercial property includes understanding different exemptions and deductions available under tax law. Here are some examples of how taxes can be saved on commercial property:
Deductions on loan interest
Interest on a loan taken for acquiring, renovating, and constructing a commercial property is eligible for deductions under section 24(b) of the Income Tax Act.
The maximum amount allowed for deduction is up to 2 lakhs per year, and any amount beyond this limit can be carried forward for eight subsequent years.
Depreciation benefits
Individuals can save tax on commercial properties through depreciation. Commercial properties are subjected to wear and tear over time, and the Income Tax Act allows for depreciation benefits. Depreciation can be claimed under section 32 of the Income Tax Act, where the individuals can get a deduction of up to a certain percentage of the property’s cost to be claimed as depreciation for that year.
Repairs and Maintenance
Expenses incurred on commercial property repairs and maintenance is also subject to tax deductions. These expenses can be claimed as a deduction per Section 30 of the Income Tax Act. However, it is very important to maintain proper records and receipts of these expenses to get the claim.
Municipal Taxes
Multiple taxes paid on a commercial property can also be a way to get tax deductions under Section 30 of the Income Tax Act. However, these taxes must be paid during the financial year for which the deduction has to be claimed.
Loss from House Property
If the income from commercial properties exceeds the deductions available, this results in a loss. Then, this amount can be set off against other heads of income, such as business income or salary. Moreover, the loss from house property can be carried forward to eight subsequent years and adjusted against future income from the commercial property.
Capital Gains exemptions
One can also get tax savings from capital gains exceptions. The sale proceeds are subject to tax exemptions if a commercial property is sold. However, this is applicable under Section 54 or Section 54F of the Income Tax Act, and the individuals can get tax savings for long-term capital gains if the proceeds are reinvested into another residential property within a stipulated period.
Other ways are available, too, such as business expenses, tax planning through entry structure, and others. However, choosing the right entity structure for owning a commercial property is necessary to gain tax savings.
