How Property Investors Should Handle The End Of The Financial Year


The Financial Year in India, is from 1st of April to 31st March every year. Hence, 31st March is an important date by which important financial obligations should be fulfilled. At the time of filing returns, most often, tax-payers run helter-skelter collating the desired forms and other documents required for the same. Here’s a quick guide to the things that you should do in order to be prepared beforehand for the financial year end 2018.

Tip No. 1:
One of the largest mistakes property investors make, is by allowing their accountant to apply a generalized depreciation rate for their property investment to save on money. Now, there’s nothing wrong with this, but we clearly need to know that the accelerated method of depreciation will see a lot more tax savings for the property investor who has purchased a new or near-new home for the first 10 years of that property’s life.

Tip No. 2:
The records that you should keep ready, include:

  1. Rental income & deductible expenses need to be kept for 5 years.
  2. Documents relating to ownership of the property including all purchasing and selling costs also need to be kept ready before March end.
  3. Housing loan repayment – The certificate from a financial institution specifying the principal paid during April 2017 to March 2018 needs to be submitted. Ask the institution to mention the provisional amount for the last 2-3 months of the current financial year as equated monthly installments (EMIs) would still be pending.
  4. House Rent Allowance Exemption – For those who claim HRA relief, the Permanent Account Number (PAN) of the landlord is mandatory. This condition is not applicable for those whose rent payment is less than or equal to Rs.1 lakh per annum, i.e., Rs. 8,333 per month.

Tip No. 3:

Quoting your Aadhar ID is not a mandate for NRIs
The Central Board of Direct Taxes (CBDT) has clarified, that the requirement to quote Aadhaar as per section 139AA of the Income Tax Act shall not apply to an individual who is not a resident as per the Aadhaar Act, 2016. Also, on 24th July, 2017, CBDT clarified that non-residents who are not claiming refund or non-residents who are claiming a refund but have a bank account in India are not required to furnish details of their foreign bank account in the return of income. However, non-residents who are claiming income tax refund but do not have a bank account in India may furnish the details of one foreign bank account in the return of income for the issuance of refund. Further, non-residents are not required to report their assets and financial interests outside India.

Now, filing a belated return reduced by 1 year:
Effective from FY 2016-17 (The assessment year 2017-18), a belated return can be filed till the end of the relevant assessment year. Thus, in case you’ve missed your chance, the time available for filing a belated income tax return for assessment year 2017-18, would be up to 31.03.2018 and not 31.03.2019.

A tip to get more from your property investment:
If you have invested in an under-construction property, interest deduction would not be allowed from taxable income, until the construction is complete. But aggregate interest paid on the home loan during the period prior to completion of construction, can be claimed as deduction in five equal installments starting with the year of completion.

And, if you plan to sell the property off within 3 years of acquisition, the asset is considered as a short-term capital asset (STCA) and is taxed as per the slab rates. Subject to commercial considerations, it would be beneficial from a tax perspective if the property is held for more than three years. Accordingly, the property would be long-term capital asset (LTCA), resulting in long-term capital gains (LTCG), which is taxed at a concessional rate of 20%.

Tax exemption is also provided on reinvestment of sale proceeds of a house/ LTCA into a new house. The condition is that, the new property should be constructed within 3 years from the sale of the original property or purchased either one year before or two years after sale.

So, with this quick checklist at your hand, you would be well-prepared for your financial year planning with all your documents, well ahead of time.


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