Income Tax on Residential Property in Kochi: What Homebuyers Should Know

Posted onFeb 27, 2026

Purchasing a flat in Kochi is sure to be a proud and exciting moment for you. Whether it’s your first home or you are growing your portfolio with smart real estate investment strategies in Kochi, you must be aware of its tax implications.

Usually, buyers look at price, location, builder reputation, and amenities. However,  tax implications can affect your ROI significantly. 

Let’s understand how income tax on residential property in Kochi works.

Tax Benefits on Home Loans

A major advantage of buying a residence is that you can avail tax savings on your home loans. Take a look at what you can claim as long as it’s self-occupied property:

• Tax deduction up to ₹2 lakh per year on home loan interest under Section 24
  
• Tax deduction up to ₹1.5 lakh per year on principal repayment under Section 80C.
  

If you’re a salaried professional in Kochi, these deductions can reduce the effective income tax rate you pay each year, making a home purchase more lucrative than renting.

Income Tax on Rental Income

When you purchase a flat to rent it out, you’re liable to pay tax on the rental income

• The rent you earn is added to your total income.
  
• The  standard deduction of 30% is allowed to help you with upkeep
  
• You are eligible for deduction on home loan interest
  

Let’s assume your annual rental income is ₹3,00,000:

• 30% standard deduction = ₹90,000
  
• Taxable rental income = ₹2,10,000. 

The final tax liability depends entirely on the income tax slab you fall into.

Renting apartments is one of the popular real estate investment strategies in Kochi, especially in premium localities Kadavanthra, Palarivattom, and Edappally.

Capital Gains Tax When Selling Property

You are liable to pay capital gains tax if you sell property after holding it for some time.

Short-Term Capital Gains apply if you sell within two years of buying property, at your usual slab.

Long-Term Capital Gains tax at 12.5 % apply if you sell property after holding it for two years. Based on the year of purchase, you may be eligible for indexation benefits.

How, to save capital gains tax:

• You reinvest the entire proceeds in another residential property.
  
• You invest the whole amount in specified government bonds with a 7-year lock-in period.
  

Tax on Additional Homes

If you own more than one property, only one will be treated as self occupied, and the other will be treated as rented or ‘deemed let out’ even if it is vacant. A notional rent on the property may be calculated, and that income will be taxed.

If you are planning to buy more than one residential property in Kochi, it is very important to remember this.

TDS on Property Purchase

If you purchase property that costs over ₹50 lakh, you need to adjust for 1% TDS, and deposit it with the government. The seller of the property will receive form 16B as proof of the TDS.

Nearly all premium properties in Kochi cost upwards of ₹50 lakh, especially in gated communities, lifestyle apartments, and waterfront properties. It is important that you comply with TDS requirements. Reputed builders in Kerala like Varma Homes guide buyers regarding this.

Difference Between Residential and Commercial Property Taxation

Income Tax for Residential Property

• 30% standard deduction on rent earned
• Better benefits of availing home loans
• Lower investment and stable rental demand

Income Tax for Commercial Property

• Higher rental income
• Fully taxable earnings after deductions
• Greater risk with potential for higher returns
• Loan structure is different

Income tax for commercial property is usually higher, and the rules are more complex.

For Real Estate Professionals

The income tax rate for a real estate broker is dependent on their total annual income, and they are taxed under business income rules. They must maintain proper accounts, pay advance tax, and also file GST if applicable. 

Conclusion

As Kochi continues to grow as a real estate hub with improved infrastructure and connectivity, the growth of the IT industry and robust NRI investment, homebuyers must familiarise themselves with tax rules. You need to consider deductions you are eligible for, estimate the rental earning potential and the long-term value appreciation.

Buying a residential space in Kochi is not just about home ownership. It’s a financial decision that can impact your wealth creation and tax liability. Knowing capital gains rules, rental income tax, TDS requirements, and deductions can help you decide smarter.

When you decide to invest in an apartment from Varma Homes, you will get to experience customer-centric service and guidance on all loan and taxation matters. Make the right decision; make a Varma Homes apartment your own.