Why are the wealthy interested in buying farmhouses? Is there a hidden tax avoidance formula behind this? A CA explains...

Farmhouse culture is rapidly spreading in India. The wealthy from big cities often gather at farmhouses for weekend getaways. But, did you know that it's also becoming a major legal tax haven for the wealthy? Recently, Meenal Goyal, founder of an AI startup and chartered accountant, explained this strategy in detail on LinkedIn.

Becoming a Means of Income Tax Saving
In her post, CA Meenal Goyal explained how wealthy individuals use farmhouses and agricultural land to reduce their income tax liability. Goyal further clarified her point by saying, "If you think farmhouses are just for weekend parties, think again." She explained how the country's wealthy utilize farmhouses and agricultural land to reduce their tax liability by taking advantage of India's income tax rules.

Zero Income Tax from Farming
She explained that income from farming is tax-free. Goyal wrote, "Show income from crops - no income tax." Furthermore, GST also has its benefits. Most agricultural products attract only 0-5% GST. This is another major benefit that the wealthy enjoy.

Tax exemption on selling land
Not only produce, but also land sales are exempt from income tax. If you sell land and reinvest the proceeds in purchasing agricultural land, you can get a tax exemption under Section 54B of the Income Tax Act. In many states, stamp duty is also lower on purchasing agricultural land. This is another benefit that the wealthy enjoy.

Why buy farmhouses?
Goyal warned that this is just the beginning. He said that the wealthy are very adept at exploiting these rules to their advantage. They know how to take full advantage of these provisions. In a YouTube video, Meenal Goyal said, "A middle-class person pays up to 35% of their hard-earned income (Income Tax + Education Cess) to the government every year as taxes. But the same rich people, who earn crores of rupees, don't pay a single rupee in taxes." She explained that income from farming is not taxed in India. Wealthy people are well aware of this and take advantage of it. This is why many wealthy people buy farmhouses in places like Noida, Gurgaon, and Hyderabad.

The rich don't even buy property in their own names.
Goyal said, "Even the world's richest people don't own property in their own names because they aren't that naive." They know the benefits of doing so. Wealthy people first form an entity such as a company, trust, or LLC. Then, they purchase property in that entity's name. This provides them with numerous tax benefits, such as depreciation. Furthermore, this property is protected from creditors. Even in a divorce situation, because the property is not legally in their name, the property remains protected.

What is a Farmhouse?
A farmhouse refers to a house built on a farm or large, green plot of land. Historically, it was a farmer's farm or house. However, nowadays, it is often purchased by wealthy individuals who occasionally visit their farmhouses for rural vacations or to enjoy the natural environment. These farmhouses not only offer comfortable and luxurious accommodations, but also include open land, where farming is also carried out.

Disclaimer: This content has been sourced and edited from Navbharat Times. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.