Wondering how buying or selling a property impacts your taxes this year? You’re not alone.

Property transactions can significantly affect your income tax filing, and the new tax regime changes for FY 2024-25 have brought fresh twists. Whether you’re a homeowner, investor, or first-time buyer, understanding these tax implications is crucial to saving money and avoiding costly mistakes.

In this blog, we unravel everything you need to know about property and taxes — from capital gains and TDS rules to rental income and home loan deductions. Let’s dive right in!

Why Property and Income Tax Are Inseparable

Real estate is one of the biggest financial moves most people make in their lives. But did you know that every property transaction — be it buying, selling, or renting — can create complex tax consequences?

With India’s evolving tax rules, especially the new tax regime launched recently, knowing how property transactions impact your taxable income can make a huge difference in how much tax you pay or save.

1. Capital Gains Tax: The Big Deal When You Sell Property (Post Property Free)

Selling a property isn’t just about pocketing the sale amount — it’s about how much tax you owe on the profit (capital gains).

• Short-Term Capital Gains (STCG): Apply if you sell within 2 years of purchase. Gains are added to your income and taxed at your slab rate (new or old regime).
• Long-Term Capital Gains (LTCG): Apply if you sell after 2 years. Gains are taxed at 20% with indexation benefits — but only under the old tax regime.

Key Tip:

If you want to save tax on capital gains, consider reinvesting the profits in a new residential property or certain bonds (under Section 54 & 54EC) — but remember, these exemptions do not apply in the new tax regime.

2. TDS on Property Transactions: What Buyers and Sellers Must Know

Buying a property over ₹50 lakh? You’re required to deduct 1% TDS from the seller’s sale consideration as per Section 194-IA.

• The buyer must deposit this TDS within 30 days using Form 26QB.
• The seller can then claim this deducted TDS while filing their income tax return.

This rule ensures proper tax collection and prevents sellers from underreporting income.

Looking to explore real-time property listings? Click here to view properties relevant to your tax planning decisions.

3. Rental Income: Your Property’s Monthly Tax Impact

If you rent out your property, the rental income is taxable under “Income from House Property”.

• You can claim a standard deduction of 30% on the rent received for repairs and maintenance.
• Interest on a home loan for the rented property is deductible up to ₹2 lakh — but only in the old tax regime.

This means the new tax regime offers fewer deductions on rental income, so plan accordingly.

4. Home Loan Benefits: Old Regime Still Holds the Edge

Home loans offer huge tax-saving opportunities, but mainly under the old tax regime:

• Principal repayment qualifies for deduction under Section 80C (up to ₹1.5 lakh).
• Interest payment on home loan is deductible under Section 24(b) (up to ₹2 lakh).
• First-time homebuyers may also claim extra benefits under Section 80EEA.

These benefits are not available under the new tax regime, making the old regime attractive if you want to maximize deductions on your home loan.

 Don’t miss this: Closed your home loan? These 5 documents are non-negotiable! — they can make or break your tax filing.

5. Other Crucial Considerations for Property Owners

• Joint Ownership: Rental income and capital gains are taxed proportionally based on each owner’s share.
• Gifts and Inheritance: Property received as gift or inheritance may have specific exemptions, but capital gains tax applies on sale.
• Document Everything: Ensure all transactions are properly documented and TDS certificates are collected to avoid future tax hassles.

Final Thoughts: Which Tax Regime Suits Your Property Transactions?

If you’re actively buying, selling, or renting property, the old tax regime often offers more tax-saving benefits due to exemptions and deductions — especially for capital gains and home loans.

However, the new tax regime brings simplicity and lower tax rates for many salaried individuals, but sacrifices many deductions on property-related income.

Pro Tip:

Use tax calculators to compare your tax liability under both regimes before filing your ITR. This simple step can save you thousands!

Ready to Take Charge of Your Property Taxes?

Understanding how property transactions impact income tax is no longer optional — it’s essential for your financial well-being.

If you found this guide helpful, share it with your friends or comment below with your questions.

Stay tuned for more tax-saving tips and property updates at blog.maadiveedu.com — and explore real estate listings, expert advice, and more at MaadiVeedu.com.

FAQs on Property Transactions and Income Tax Filing in India (2025)

1. How is capital gains tax calculated on the sale of property?

Capital gains tax depends on the holding period:

• If you sell within 2 years, it’s short-term and taxed at your income slab rate.
• For property held longer than 2 years, long-term capital gains tax at 20% with indexation applies (only in the old tax regime).

2. Is TDS mandatory when buying property above ₹50 lakh?

Yes. Buyers must deduct 1% TDS on the sale value exceeding ₹50 lakh and deposit it with the government. This TDS is credited to the seller’s tax account.

3. Can I claim home loan interest deduction under the new tax regime?

No.

Home loan interest deduction up to ₹2 lakh under Section 24(b) is available only in the old tax regime. The new regime does not allow this deduction.

4. How is rental income from property taxed?

Rental income is taxable under “Income from House Property.”

You can claim a standard 30% deduction on rent received for maintenance expenses. Interest on home loan is deductible only under the old tax regime.

5. What exemptions are available on capital gains from property sale?

Under the old tax regime, exemptions under Sections 54, 54F, and 54EC allow you to save tax by reinvesting capital gains in residential property or specified bonds. These exemptions are not available in the new tax regime.

6. Should I choose the old or new tax regime if I have property income?

Generally, the old tax regime offers more benefits on property-related deductions like home loan interest and capital gains exemptions.

However, you should compare both regimes using your income details before deciding.