Sir.
Various blogs on personal finance suggest that at an old age, (around 70-75) a person should dispose off his second residential property ( due to the headaches associated with renting , managing, bequething etc) and invest the proceeds in other simpler financial products.
My query is about the taxation part of this move. As per the current tax laws, the profits accrued on sale of property are taxable, unless invested in another real estate within stipulated time. So if an old person does NOT buy a new property , he ends up paying sizeable IT . Is this assumption correct ? If so what is the way out, REVERSE MORTGAGE ?
Regards
Anand
3 Answers
Dear Anand ji,
In Financial Planning, I do not believe that are any hard-core thumb rules. Each individual's / family's financial profile can be very unique.
So, an investment plan can vary from individual to individual..
Yes, one needs to pay taxes on Long term capital gains / STCG on sale of property.
If one is not comfortable managing a property or needs some financial support for meeting living expenses, reverse mortgage can be considered.
You may kindly go through below articles :
Sir.
Further to above discussion, can one avoid / minimize tax as under :-
- Sale the property, and buy a smaller property with the profit. So NO tax.
- Retain this new property for two years ? and repeat the step 1.
- Repeat
Dear Anand,
Yes, the above process can be implemented..but kindly note that real-estate investments can be very risky affairs for short term. Liquidity issues can arise. You may not be able to find a right buyer or right market time to sell your property.
Do note that investments should not be done just based on 'Tax saving'. It should be done based on your overall risk profile, investment objectives and time-frame.
Related articles :
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