Real Estate Tax Deductions to Know

An NRI woman made ₹1.35 crore from mutual funds. Paid zero tax in India. Got an Income Tax notice anyway. Then won. Here's how she did it, and why most people don't know this exists. She lived in Singapore. Tax resident there. Sold her Indian mutual funds. ₹88.75 lakh from debt funds. ₹46.91 lakh from equity funds. Total capital gains: ₹1.35 crore. She filed her ITR. Claimed exemption under Article 13(5) of the India-Singapore DTAA (Double Taxation Avoidance Agreement). Her argument: Singapore doesn't tax capital gains. So under the treaty, only Singapore has the right to tax her. And since Singapore charges zero, she owes zero. The Income Tax Department said no. "Mutual funds derive value from Indian assets. So gains are taxable in India." She took it to ITAT (Income Tax Appellate Tribunal) ITAT ruled in her favor. The key distinction: Mutual funds are issued by trusts. Not companies. So they're not "shares." They fall under the "residual clause" of the DTAA. Which means: taxable only in the country of residence. Result? Zero tax. Now here's where it gets interesting. This isn't just Singapore. India has signed 94 DTAAs. UAE, Kuwait, Mauritius, Switzerland. Many have similar clauses. If you're an NRI in a country that doesn't tax capital gains AND your DTAA has Article 13(5) or a similar residual clause? You could legally pay zero tax on mutual fund redemptions in India. While a resident Indian would pay 12.5% LTCG or 20% STCG on the same gains. ₹1 crore gain = ₹12.5 lakh tax for a resident. Same ₹1 crore gain = ₹0 tax for an NRI in UAE or Singapore. Legally. The requirements: → A valid Tax Residency Certificate (TRC) from your country → Proof you stayed 183+ days there → Proper ITR filing in India, claiming DTAA exemption → Form 10F and supporting docs Miss any of this? You're paying full tax. And if your gains exceed ₹3 crore, GAAR (General Anti-Avoidance Rules) might get triggered. So this isn't a "move abroad and dodge taxes" loophole. It's a legitimate treaty benefit. For people who actually live and work abroad. Most NRIs don't know this exists. Most CAs don't push it because it's tedious paperwork. And the IT Department will challenge it, like they did here. The law is there. The treaties exist. Most people just don't know they can use them.

𝐂𝐥𝐚𝐫𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧: 𝐓𝐡𝐞 𝐍𝐢𝐠𝐞𝐫𝐢𝐚 𝐓𝐚𝐱 𝐀𝐜𝐭 2025 𝐡𝐚𝐬 𝐂𝐨𝐦𝐦𝐞𝐧𝐜𝐞𝐝 𝐚𝐧𝐝 𝐃𝐨𝐞𝐬 𝐍𝐎𝐓 𝐈𝐦𝐩𝐨𝐬𝐞 𝐚 25% 𝐓𝐚𝐱 𝐨𝐧 𝐁𝐮𝐢𝐥𝐝𝐢𝐧𝐠 𝐌𝐚𝐭𝐞𝐫𝐢𝐚𝐥𝐬 𝐨𝐫 𝐅𝐮𝐧𝐝𝐬 We are aware of a recent video claiming that the new tax laws will commence in 2027 and alleging the imposition of a 25% tax on funds for building materials and other transactions.   Both claims are incorrect. Contrary to the misinformation seeking to create fear, panic and disaffection, the Nigeria Tax Act 2025 has already commenced and does not impose a 25% tax on construction funds, bank balances, or business expenses. Instead, it contains provisions specifically designed to reduce the cost of housing, rent and real estate development. 𝐊𝐞𝐲 𝐏𝐫𝐨𝐯𝐢𝐬𝐢𝐨𝐧𝐬 𝐨𝐟 𝐭𝐡𝐞 𝐍𝐢𝐠𝐞𝐫𝐢𝐚 𝐓𝐚𝐱 𝐀𝐜𝐭, 2025 Relevant provisions to make housing more affordable, encourage real estate development, and support small business property contractors and low-income renters include: 𝑳𝒐𝒘𝒆𝒓 𝑪𝒐𝒔𝒕 𝒐𝒇 𝑩𝒖𝒊𝒍𝒅𝒊𝒏𝒈 𝒂𝒏𝒅 𝑷𝒓𝒐𝒑𝒆𝒓𝒕𝒚 𝑫𝒆𝒗𝒆𝒍𝒐𝒑𝒎𝒆𝒏𝒕 𝘝𝘈𝘛 𝘌𝘹𝘦𝘮𝘱𝘵𝘪𝘰𝘯 𝘰𝘯 𝘓𝘢𝘯𝘥 𝘢𝘯𝘥 𝘉𝘶𝘪𝘭𝘥𝘪𝘯𝘨𝘴 (𝘚.185(𝘭)): Land and buildings are now specifically exempt from Value Added Tax (VAT). 𝘐𝘯𝘱𝘶𝘵 𝘝𝘈𝘛 𝘊𝘳𝘦𝘥𝘪𝘵𝘴 𝘧𝘰𝘳 𝘊𝘰𝘯𝘵𝘳𝘢𝘤𝘵𝘰𝘳𝘴: Where VAT is chargeable on any materials or service, contractors can now recover VAT on their assets and overhead costs, which lowers overall construction costs. 𝘙𝘦𝘥𝘶𝘤𝘦𝘥 𝘞𝘪𝘵𝘩𝘩𝘰𝘭𝘥𝘪𝘯𝘨 𝘛𝘢𝘹 (𝘞𝘏𝘛): A lower 2% WHT rate is applicable on construction contracts, helping to conserve cash flow and reduce financing pressure on developers. 𝑰𝒏𝒄𝒆𝒏𝒕𝒊𝒗𝒆𝒔 𝒇𝒐𝒓 𝑰𝒏𝒗𝒆𝒔𝒕𝒐𝒓𝒔 𝒂𝒏𝒅 𝑫𝒆𝒗𝒆𝒍𝒐𝒑𝒆𝒓𝒔 𝘊𝘢𝘱𝘪𝘵𝘢𝘭 𝘎𝘢𝘪𝘯𝘴 𝘛𝘢𝘹 𝘌𝘹𝘦𝘮𝘱𝘵𝘪𝘰𝘯 (𝘚.51(1)): Individuals pay no Capital Gains Tax (CGT) when disposing of a dwelling house or an interest in one. 𝘗𝘳𝘪𝘰𝘳𝘪𝘵𝘺 𝘚𝘦𝘤𝘵𝘰𝘳 𝘐𝘯𝘤𝘦𝘯𝘵𝘪𝘷𝘦𝘴: Manufacturing of building materials such as iron, steel, and domestic appliances qualifies for specific tax exemption under the economic development incentive scheme for up to 10 years. 𝑾𝒉𝒂𝒕 𝒊𝒔 𝑵𝑶𝑻 𝒊𝒏 𝒕𝒉𝒆 𝑻𝒂𝒙 𝑳𝒂𝒘 The Act does not: • Tax money in bank accounts or bank balances. • Tax transfers for buying building materials. • Introduce a 25% construction or business cost tax. • Delay implementation until 2027. “Fact Not Fear”, evidence beats emotion. If anyone makes an alarming claim or tries to misinform you, ask them “Where is it in the law?” With the new tax laws, housing should become more affordable and rent should go down NOT up! Read document for more information. — 𝘗𝘳𝘦𝘴𝘪𝘥𝘦𝘯𝘵𝘪𝘢𝘭 𝘍𝘪𝘴𝘤𝘢𝘭 𝘗𝘰𝘭𝘪𝘤𝘺 𝘢𝘯𝘥 𝘛𝘢𝘹 𝘙𝘦𝘧𝘰𝘳𝘮𝘴 𝘊𝘰𝘮𝘮𝘪𝘵𝘵𝘦𝘦

The government has announced its carveouts for its proposed changes to the capital gains tax (CGT), and I think it’s hard to argue it's anything other than a resounding victory for startups, small businesses, and the innovation ecosystem. Here's what's been proposed: 1. Increasing the 'annual turnover' threshold to qualify for a small business tax concession Small business owners are already eligible for a range of generous tax concessions when they sell their business. However, the threshold for the definition of a small business hasn't been revised in decades. The government has proposed raising the 'annual turnover' threshold for the 'active asset reduction' from $2 mn to $10 mn. The reduction gives business owners a 50% CGT discount when they sell business assets. According to the ABS, this will cover 2.7 mn small businesses, or 98% of all active businesses in Australia. The vast majority of active businesses in Australia will receive a 50% discount on capital gains from asset sales. 2. Making the first $10 mn of capital gains on equity in innovative businesses eligible for a 50% CGT discount A key concern about the removal of the CGT discount was its impact on innovative startups: that taxing exits at 47% would dampen risk-taking appetite and drive talent offshore. The government has proposed making the first $10 mn of capital gains from shares in ‘innovative companies’ eligible for the 50% CGT discount, capped at a lifetime concession of $2.4 mn per person. There will be a consultation on which companies qualify as 'innovative'; it's been signalled that existing frameworks such as ESIC will be used as a point of departure. It's also been signalled that the definition will favour smaller companies (<$50 mn of annual turnover) and younger startups (<10-years-old; 15 years for medtechs and biotechs). The upshot is that the vast majority of startup operators and early investors will be covered by this carveout, and continue to receive favourable treatment on capital gains. Founders will be covered for the first $10 mn of their capital gain, and those who knock it out of the park will pay the top marginal income tax rate (currently 47%) on the remainder. These carveouts are modelled to have a relatively modest fiscal impact: a $475 mn cost to the budget over the next four years. What I like about this proposal is that the 'winners' are the smaller end of town: the 'risk-taker' who builds a small business that does up to $10 mn of annual turnover, or who joins an early-stage startup and gets up to a $10 mn windfall in sweat equity upon exit. These are the people that those who so virulently opposed the proposed changes purported to be concerned about; not the founder who would have to pay more on their >$100 mn exit. There will continue to be debate about these concessions over the next few weeks. I'd say, watch out for people who continue to be in opposition. Whose interests are they really watching out for?

If you sell a house and simply pay capital gains tax – you’re missing out on a powerful wealth-building opportunity. You can either burn it once… or put it back into the engine and let it take you further. Smart investors don’t “spend” capital gains. They reinvest them. There are multiple options available under the Income Tax Act that allow you to defer or completely save tax, while also keeping your wealth in motion: ✅ Section 54 – Reinvest the LTCG into another residential property (within specific timelines) ✅ Section 54F – Invest the entire sale consideration in a new residential property (ideal if the original asset sold was NOT a residential house) ✅ Section 54EC – Invest the capital gain in specified bonds (NHAI/REC) within 6 months of transfer. This is not just about “reducing tax liability”. It’s about allowing your money to continue compounding. It’s about keeping your financial momentum alive. In the wealth game – it’s not just about making gains. It’s about protecting them… and deploying them wisely. #FinancialPlanning #RealEstate #TaxSavings #InvestWisely #CapitalGain

An Installment Sale occurs when you sell property (like real estate, a business, or business assets) and receive at least one payment after the tax year in which the sale occurs. The Installment Method is a special tax accounting rule that allows the seller to spread the recognition of the taxable gain over the years in which the principal payments are actually received. Why pay tax on the entire profit today when you won't receive all the cash for five years? The Installment Method fixes this by letting you pay tax as you get paid. This aligns the tax liability with the actual cash flow. Under the Installment Method, each payment you receive is split into three parts: - Interest Income: Taxed as ordinary income (reported on Schedule B). - Return of Basis (Capital): Non-taxable return of your original investment. - Gain (Taxable Income): The portion of the payment on which you pay tax. To figure out how much of each payment is taxable gain, you use the Gross Profit Percentage (GPP). 1. GPP = Gross Profit (Selling Price - Adjusted Basis) / Total Contract Price 2. Income Recognized This Year = Payments Received This Year * GPP Example: You sell a commercial property for $1,000,000 with an adjusted basis of $400,000. The buyer pays $200,000 down and pays the rest over 4 years. 1. GP: $1,000,000 - $400,000 = $600,000 2. GPP: $600,000 / $1,000,000 = 60% 3. Year 1 Taxable Gain: You received a $200,000 payment. ($200,000 * 60% = $120,000) 4. In Year 1, you only pay tax on $120,000 of the gain, instead of the full $600,000. You will report the sale annually using IRS Form 6252 Tax Benefits: 1. Tax Deferral: This is the most obvious benefit. You delay paying tax on future payments, allowing you to keep and use that cash longer. 2. Lower Tax Bracket: By spreading a large gain over multiple years, you can prevent a one-time spike in income that might push you into a higher Ordinary Income or Capital Gains tax bracket. 3. Mitigating Other Taxes: Spreading the gain can help keep your Adjusted Gross Income (AGI) lower in any single year, which can help you avoid or reduce other taxes, such as the Net Investment Income Tax (NIIT) or the high-income surcharge on Medicare premiums. The one major drawback is that any portion of the gain that is considered Depreciation Recapture (the amount of prior depreciation you claimed that must be taxed at ordinary income rates) cannot be deferred. You must report all depreciation recapture as ordinary income in the year of the sale, even if you receive no cash payment that year. This recaptured amount is then added to your basis, which reduces the total gain calculated in future years. Follow @thetaxsaaab on Instagram for more.

₹26 Crore Capital Gain. Zero Tax. Legally. A recent ITAT Kolkata ruling has reinforced an important principle under Section 54F. A taxpayer sold listed shares and earned ~₹26 crore in long-term capital gains. She invested in the construction of a residential house and claimed exemption under Section 54F. The department denied it on three grounds: • She allegedly owned more than one residential house • Construction had begun before the date of sale • Sale proceeds were not directly used for construction The Tribunal rejected all three objections. Key takeaways: 1️⃣ Joint ownership of a house does not amount to exclusive ownership for disqualification under Section 54F. 2️⃣ Vacant land with a tenant-constructed factory is not a “residential house.” 3️⃣ Construction need not begin after the date of transfer. The law only requires completion within 3 years. 4️⃣ There is no requirement that the exact sale proceeds must be directly utilised for construction. Result: ₹26 crore exemption allowed. Tax demand deleted. The larger lesson? Tax planning within the framework of law is not tax evasion. Interpretation matters. Documentation matters. Substance matters. When you comply with the conditions, the law protects you.

Taxes feel inevitable. Leaving money on the table is not. Here is how to close the gap. Step 1: Find hidden tax leaks →Review returns. Flag missed deductions with your CPA. Step 2: Align your entity structure →Match entities to income, liability, and exit strategy. Step 3: Accelerate depreciation →Cost segregation on a $1M property can unlock $200K in deductions. Step 4: Time income intentionally →Prepay expenses or defer income before year-end to shift your bracket. Step 5: Build a long-term tax roadmap →A planned 1031 exchange can defer six figures. Strategy compounds just like capital. Most investors plan deal to deal. Wealth builders plan decade to decade. Does your tax strategy reflect where you want to go, or is it still catching up to where you have been?

Family Offices know that preserving capital is more than protecting against a market downturn. It means structuring assets to reduce tax exposure across generations. One of the most effective tools for that is the step-up in basis. Suppose an investment in real estate began at $5 million and grew to $100 million. If that asset were sold during the owner’s lifetime, taxes would apply to the $95 million gain. But if the asset is held until death, the cost basis resets to its current market value. Heirs now start from a basis of $100 million. Any past gains are wiped away for tax purposes. Future taxes only apply to appreciation beyond that new basis. This simple reset can mean tens of millions in taxes legally avoided. Many Family Offices hold core assets for decades. That long-term hold, combined with appreciation, creates significant embedded gains. Without the step-up, those gains are exposed at liquidation. For example, if the capital gains rate is 25%, then a $95 million gain could trigger $23.75 million in taxes. A step-up eliminates that liability. The difference stays with the family, available to reinvest or redeploy into the next opportunity. Real estate aligns with this strategy. It appreciates over time, provides current income, and allows for depreciation during the hold. And because Family Offices often build long-term direct real estate portfolios, the step-up in basis reinforces their approach. According to the Family Office Real Estate Institute, 76.4% of Family Offices invest in real estate to create generational wealth. Tax strategies like the step-up are one reason why real estate continues to play such a key role in Family Office portfolios. Capital preservation isn't just about risk management. It requires structure, timing, and a clear view of tax exposure. Using the step-up in basis correctly can help secure wealth across generations. Families who plan with these tools keep more of what they’ve built. That’s smart estate strategy and good stewardship.

Washington just dropped a legislative bombshell on the real estate world — and it’s packed with opportunity for those who know how to act fast. The One Big Beautiful Bill Act, signed into law on July 4, 2025, isn’t just a tweak to the tax code — it’s a complete reshaping of how investors structure deals, time acquisitions, and unlock tax advantages. Here’s what stands out: ✅ 100% Bonus Depreciation is Back — Qualifying property placed in service after Jan. 19, 2025 can be written off in year one. With the right cost segregation, that could mean millions in deductions on a single deal. ✅ Section 179 Expensing Expanded — Up to $2.5M of certain property improvements can be deducted immediately. Perfect for projects under $5M that need big upgrades without slow depreciation schedules. ✅ Green Incentives on a Countdown — Energy-efficient building deductions (179D) and residential credits (45L) phase out after June 30, 2026. If sustainability is part of your plan, the clock is ticking. ✅ 1031 Exchanges Stay Alive — Pairing exchanges with bonus depreciation just became a tax-efficiency powerhouse. ✅ New Opportunity Zones Coming in 2027 — Fresh designations mean new chances to align with growth markets early. This law is live now — and some of its best incentives are already on the clock. The investors who adjust fastest will capture the biggest benefits. At CPI Capital, we’re already mapping how these changes influence underwriting, project feasibility, and long-term returns. If you’re planning acquisitions, developments, or value-add projects in the next 24 months, now is the time to align your tax strategy with the new rules. #cpicapital #realestateinvesting #taxstrategy #wealthbuilding #obbba2025

Ways the Big Beautiful Bill Will Impact CRE Investors Bonus Depreciation Beyond extending the 2017 cuts, the bill brings back 100% bonus depreciation, allowing owners to write off the full cost of their assets. With bonus depreciation back we will see more improvements that incentivize better buildings, a higher quality of life for users, and more flexibility for investors that use a value-add strategy. This is a cornerstone of the tax bill for the CRE world. Deductions First, the QBI deduction which was passed in 2017 is set to expire at the end of 2025, but this new legislation makes it permanent. This significantly increases the return owners see on their investments, while also supporting the income of businesses that lease and utilize commercial real estate. This naturally frees up capital for new development, business expansion, new hiring and property upgrades. Second, an increase to the SALT deduction cap will provide investors in high-tax states like California and New York a way to lower their Federal tax bill. This will free up capital for investors operating in the places that were hardest hit by the pandemic, helping aid the rejuvenation of some of America’s most iconic cities. Opportunity Zones and Industrial Focus The bill expands and makes permanent the wildly successful opportunity zones policy from the 2017 bill. The new legislation also allows developers in rural zones to access the tax benefits of renovations at a lower threshold, lowering the financial requirement to qualify from 100% of investment cost to just 50% in rural opportunity zones. This will foster rehabilitation of small towns across the country. The bill also creates an entirely new category of assets called Qualified Production Properties. When building a manufacturing plant or modern warehouse that qualifies you can deduct the entire cost of the project immediately. These policies will do more to grow American manufacturing than any trade policy will. 1031 Exchange Rules Preserving 1031 exchanges allows investors to shift strategies and transact freely in the marketplace. Estate Taxes This bill raised the floor on the estate tax to $15 million. With the threat of a massive estate tax bill removed for many families, investors are encouraged to hold onto their properties for the long term. Spending Provisions The bill also invests $12.5 billion to modernize the nation’s FAA air traffic control systems. This upgrade boosts efficiency at major airports, directly increasing the value and long-term viability of the critical logistics properties.