Byapaar.com -The Indian Business Blog

The Union Budget for the financial year 2008-09 has brought few smiles on the faces of middle class people. It is clear that, the UPA government has an eye for early national pools -may be by end of this year and hence there is lots of cheers for the all powerful middle class.

The Finance Minister has not only raised the taxable income level from that of last year, but it has also offered some schemes to lessen tax liability. For example, if someone is earning a monthly income of Rs. 25,00/month, his current tax liability is around Rs. 3,347.50/month. In the new taxation syste, the liability for the same income will be Rs. 1,287.50/month and that too without claiming any tax benefit on offer.

So how to save this extra money?

The best way, according to analysts is to invest in real estate. Due to higher interest rates - the rela estate market has been going through aprice adjustment or correctional phase over the last few months. So price is quite stable at the moment. The new budget is not offering any extra benefit under Sec. 80 C or Sec 80 D - but due to lower tax liability, the taxpayer can easily utilize the fund judiciously.

The Sec. 80 C has been facilitating tax benefits for certain saving instruments including repayment of home loans. But only Rs. 1,00,000/annum can be accounted for this purpose. One can also claim benefit for Rs.1,50,000/annum as repayment of interest for the housing loan. So thats a cool benefit for Rs. 2,50,000/annum.

Another attractive factor in this regard is that, some banks are already lowering interest rates for housing loans and it seems that, the home loan iterest rate might come down further due to global meltdown trend.

Now, we may consider how one gains through investment in real estate properties. Studies have shown that value of Indian real estate properties has seen a compunded annual growth rate of around 15-18 percent. S, the value is always increasing.

Just one point to be cautious is that, the government is giving these sops for personal or live in properties only. If some one buys a property and sells it within next five years, then he/she will have to pay taxes for all these years.

If you have a house and are pondering at what to do - just go ahead, take home loans, buy a nice property and rent it out. The rent will help you pay the EMI (Easy Monthly Installment) and by the time you are ready to settle down, your home loan liability will be NIL. You can enjoy your superannuiation benefits for your recreations. Just remember one thing - the tax implications in this case will have to be worked out after deducting the rent you get. Stil you are the winer.