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Buying property through a limited company?

22 February 2023

I am a salaried individual ( 50 lpa - 1 CR) and fall under high tax bracket. My other income include trading in stocks (Domestic & International) (upto 15Lpa). I am looking to optimize my taxes. I am planning to form a Pvt Limited company, primarily to trade in stocks and aquire few residential properties for rental income.
a) Do I have any benefit on buying the property under a newly formed pvt Ltd company vis a vis buying as an individual? Will the bank finance the property?
b) Can I buy the Property under PVT Ltd and then rent it to myself? Will I be able to claim HRA?
c) Any disadvantage of owning property under company's name?

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2 Replies

Ayush (Executive ) (6760 Points)
Replied 24 February 2023

a) Buying a property under a newly formed Pvt Ltd company can have tax benefits in terms of reducing your personal tax liability. However, the decision to buy the property through a company should be based on a number of factors, including your long-term investment goals, financial position, and tax planning objectives.
In terms of financing, banks can provide loans to companies for purchasing properties. However, the eligibility criteria may differ from individual loans, and the company's creditworthiness and financials will be evaluated by the bank.

b) It is possible to buy the property under the Pvt Ltd company and rent it to yourself. However, claiming HRA (House Rent Allowance) will not be possible in this scenario, as the HRA benefit is only applicable to salaried individuals who are renting a property from someone else.

c) Owning a property under a company's name may have some disadvantages, including higher tax implications, additional compliance requirements, and limited opportunities for availing tax benefits available to individual taxpayers.

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CA Sorav Gupta (Chartered Accountant) (1005 Points)
Replied 24 February 2023

Not a good idea. Instead of a Private company incorporating an LLP will be a better idea however, the amount of rent and the T&C of the banks also to be considered before taking any final decision.

Obtain a paid consultancy for proper tax planning to minimize the future litigations.

In case of any further queries, kindly mail me at casoravgupta @ gmail.com

Thanks & Regards
CA. Sorav Gupta
(Practicing Chartered Accountant)