Key Takeaways

• Standard Deduction: ₹30,000 on rental income under new tax regime (FY 2025-26)
• Interest Deduction: Up to ₹2 lakhs under Section 24(b) for home loan interest (fractional residential)
• Capital Gains: LTCG 20% with indexation after 24 months (commercial), 12.5% without indexation
• AIF Treatment: Category I AIF pass-through taxation - profits taxed at individual slab rates
• GST Input Credit: Available on commercial property purchases registered under GST

Section 80C Benefits for Fractional Investors

While fractional real estate investments through AIFs don't directly qualify for Section 80C deductions, investors can utilize related strategies:

Indirect 80C Benefits:

1. Mortgage Route: If financed via home loan for fractional residential, principal repayment qualifies for ₹1.5L Section 80C limit
2. REIT Investments: Some fractional platforms offer REIT units which may qualify for specific deductions
3. Infrastructure Bonds: Real estate-backed bonds can provide Section 80CCF benefits (₹20,000)

Section 24(b): Interest Deduction

Applicable To: Fractional residential properties (not commercial)
Deduction Limit: ₹2,00,000 per financial year
Conditions: Property construction must be complete, loan from registered financial institution

Capital Gains Tax Treatment

Commercial Properties (58% of ZenithAbode portfolio):

• Holding Period: 24 months for LTCG classification
• LTCG Tax: 20% with indexation benefit OR 12.5% without indexation (investor choice)
• STCG Tax: Taxed at individual slab rate (up to 30%)
• Indexation Benefit: Cost Inflation Index (CII) adjustment - FY 2024-25 CII: 363

Residential Properties:

• Holding Period: 24 months for LTCG (from FY 2023-24, previously 36 months)
• LTCG Exemptions: Section 54F (₹10 crore turnover limit) if reinvested in residential property
• LTCG Tax: Same as commercial - 20% with indexation or 12.5% without

AIF (Alternative Investment Fund) Tax Treatment

ZenithAbode operates as Category I AIF (SEBI Reg: IN/AIF1/21-22/0847). Tax implications:

Pass-Through Taxation:

• Rental Income: Taxed as "Income from House Property" at individual slab rates
• Capital Gains: Taxed as LTCG/STCG based on holding period at individual rates
• TDS: 10% TDS on distributions above ₹5,000 per quarter
• Form 64D: Annual AIF statement for tax filing (provided by platform)

Tax-Saving Strategies for 2025

Strategy 1: Hold Beyond 24 Months

Benefit: LTCG tax (20% with indexation) vs STCG (30% for high earners)
Indexation Benefit: Reduces taxable gains by ~7-8% annually
Example: ₹10L property sold after 3 years at ₹13L - Indexation reduces taxable gain from ₹3L to ₹1.8L

Strategy 2: Offset Gains with Losses

Capital losses from other investments can offset fractional real estate capital gains:

• LTCG from stocks can offset LTCG from property
• Carry forward capital losses for 8 years
• Tax-loss harvesting in secondary market for fractional units

Strategy 3: Spread Investments Across Financial Years

Distribute large investments across FY boundaries to:

• Optimize rental income across tax years
• Manage capital gains in lower-income years (retirement, sabbatical)
• Utilize standard deduction limits effectively

GST Implications

Commercial Properties:

• GST on Purchase: 18% (input credit available if registered)
• GST on Rental: 18% (reverse charge if annual rent > ₹20L)
• Platform Fees: 18% GST on management fees

Residential Properties:

• Affordable Housing: 1% GST (carpet area <90 sqm, value <₹45L)
• Other Residential: 5% GST without input credit
• Resale/Secondary: No GST

State-Specific Stamp Duty Benefits

Maharashtra (37% of ZenithAbode portfolio):

• Women buyers: 1% discount on stamp duty
• Mumbai: 5% stamp duty + 1% registration
• For fractional: Pro-rata stamp duty on ownership percentage

Karnataka (28% of portfolio):

• Bengaluru: 5% stamp duty (3% for women)
• Additional 2% cess
• Online registration with instant verification

Tax Documentation Required

1. Form 64D: Annual AIF statement (from platform)
2. Unit Holding Certificate: Ownership proof for capital gains
3. Rental Income Statement: Quarterly distributions
4. TDS Certificates: Form 16A for TDS deducted
5. Investment Agreement: Purchase documentation

Common Tax Mistakes to Avoid

1. Not Claiming Standard Deduction: ₹30,000 on rental income (new regime)
2. Ignoring Indexation: Always calculate both methods (20% with indexation vs 12.5% without)
3. Wrong ITR Form: Use ITR-2 for capital gains, not ITR-1
4. Missing Section 54F Deadline: Reinvestment must occur 1 year before or 2 years after sale
5. Not Reporting AIF Income: Even if no distribution, report in ITR

Summary: Tax Optimization Checklist

Expert Consultation Recommended

Tax laws for fractional real estate are evolving. Consult a CA familiar with:

• AIF taxation structures
• Real estate capital gains
• State-specific stamp duty regulations

Disclaimer: This article provides general tax information based on Indian Income Tax Act, 1961 and regulations as of October 2025. Tax implications vary by individual circumstances. Consult a qualified Chartered Accountant for personalized advice. ZenithAbode does not provide tax advisory services.

Sources: Income Tax Act 1961, SEBI AIF Regulations 2012, CBDT Circulars, ZenithAbode investor tax statements (anonymized), Ministry of Finance Budget 2025 documents