How to save Capital Gains Tax on Sale of Land / House Property?
Capital assettypically refers to anything that you own for personal or investment purposes. It includes all kinds of property; movable or immovable, tangible or intangible, fixed or circulating.
Examples include a house, land, household furnishings, stocks, bonds or mutual funds held as investments etc.,
When you sell a capital asset, the difference between the purchase price of the asset and the amount you sell it for is a capital gain or a capital loss. Capital gains and losses are classified as long-term or short-term.
If Land or house property is held for 36 months or less24 months or less(w.e.f. FY 2017-18)then that Asset is treated as Short Term Capital Asset. You as an investor will make either Short Term Capital Gain (STCG) or Short Term Capital Loss (STCL)on that investment.
If Land or house property is held for more than 36 monthsmore than 24 months(w.e.f FY 2017-18 / AY 2018-19) then that Asset is treated as Long Term Capital Asset. You will make either Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL) on that investment.
You may have to pay Capital Gains Tax on STCG / LTCG.
In this post let us understand – How to calculate Short Term capital gains on sale of land or property? How to calculate Long Term Capital Gains on sale of land or house? What are the applicable capital gain tax rates on sale of land / house property? How to avoid / save / minimize capital gains tax on sale of land or flat?
How to calculate Capital Gains on sale of Land or House property?
Short Term Capital Gains Calculation is calculated as below:
STCG = Total Sale Price – Cost of acquisition – expenses directly related to sale – cost of improvements.
Long Term Capital Gains Calculation;
The LTCG calculation is similar to STCG. The only differences are, you are allowed to deduct Indexed Cost of Acquisition/Indexed Cost of Improvements from the sale price and also claim certain exemptions to save capital gains tax.
With effective from Financial Year 2017-18, the base year for calculation of Indexation is going to be 2001.
(Indexation is done by applying CII – cost inflation index. This increases your cost base ie purchase price and lowers your gains. Your purchase price is adjusted for the impact of inflation.
How do you calculate the indexed cost of purchase? The indexed cost is calculated with the help of a table of cost inflation index.
Divide the cost at which you purchased the Property by the index as on the date of the purchase. Multiply this by the index as on the date of sale.
For Example : If purchase year is 2011 and year of sale is in Financial Year 2015. Then indexed cost of purchase would be –
Below is the Cost Inflation Index Table from 2001-02 to FY 2020-21 for your reference. Cost Inflation Index (CII) for FY 2020-21/ AY 2021-22 Notified by CBDT at 280.
What are the applicable Capital Gains Tax Rates on Sale of Property AY 2021-22?
Short Term Capital Gains are included in your taxable income and taxed at applicable income tax slab rates.
Long Term Capital Gains are taxed at 20%.
How do I save Capital Gains Tax from sale of Property?
Capital gains tax on Short term gains is unavoidable and no exemptions are available to minimize your tax liability. However, you can claim deductions to lower the tax liability on long-term gains.
How to save Capital Gains Tax by claiming Exemption u/s Section 54EC? (Applicable to LTCG only, on sale of both land / house property / commercial property)
Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.
These bonds are issued by the Rural Electrification Corporation and the National Highways Authority of India.
The exemption is equal to the investment or the capital gain, whichever is lower. If you transfer or take a loan against these bonds within three years, the capital gain will become taxable.
These are redeemable after 3 years and must not be sold before the lapse of 3 years from the date of sale of the house property. The Bonds issued u/s 54EC for saving of LTCG on sale of property will now have a lock-in period of 5 years instead of 3 years from FY 2018-19.
You are allowed a period of 6 months to invest in these bonds, but before the Income Tax Return filing date (to claim this exemption).
You can invest a maximum of Rs 50 lakhduring a financial year in these bonds as per Budget 2015-16.
How to save Capital Gains Tax by claiming Exemption u/s Section 54? (Applicable to LTCG on sale of house property only)
You can use the entire Long Term Capital Gain proceeds on sale of a residential house to buy another house property (residential property) to save Capital Gains tax. Below conditions need to be satisfied though;
The new house has to be bought one year before(under-construction property) the transfer of the first house or within two years after the sale. (For an Under construction property or flat , the construction has to be completed within three years of the transfer of the first property.)
The deduction allowed is equal to the actual investment or the capital gain, whichever is lower.
If you plan to use the gain to build a house, it has to be done within three years of the sale of the property. Do note that ‘cost of land’ can be included in the construction cost.
How to save Capital Gains Tax u/s 54F?(Conditions applicable to LTCG on sale of Land or Commercial Property)
Below conditions need to be satisfied in case you sell land and are planning to buy a residential home.
You can use the entire sale proceeds (received by selling a plot / land) to buy a new house or to build a new residential house.
If you use a part of the money, the deduction will be proportion of the invested amount to the sale price.
The time-frame for investment is the same as that for capital gains from residential property.
You should not own more than one residential house prior to this investment.
The deducted capital gain (from sale of land) becomes taxable if you buy another house (other than the new one) within two years of the transfer of the original asset or construct a new one within three years.
If the new house is sold within three years, the deduction claimed will become taxable as a long-term gain.
This new house purchased or constructed must be situated in India.
The proceeds should not be invested in a commercial propertyor in another vacant plot.
How to Save Long Term Capital Gains Tax without buying another House Property?
If you are unable to invest the sale proceeds in any of the above options before the date of income tax returns filing , you can deposit the CAPITAL GAINS (not entire sale proceeds) amount in a public sector bank or other banks as per the Capital Gains Account Scheme- CGAS, 1988.
The capital gain (full amount or utilized amount)can be deposited in CGAS account.
This is only a stop-gap arrangement, as the funds have to be used to buy or build a house within the period specified.
The deposited money can be used only to buy or construct a residential house within the prescribed time frame.
If you withdraw funds from this account, they have to be used within 60 days.
If you do not utilize the amount within three years of the sale of the first property, such un-utilized amount will be treated as LTCG this will lead to taxation of the unutilized amount as long-term capital gain after three years of the sale of the first / original property.
The interest rates paid on these accounts are the same as those on regular savings and term deposits. Kindly note that interest earned on this account is taxable.
How to Save Long Term Capital Gains Tax under New Section 54GB(5)?
Under Section 54GB(5) of the Income Tax Act, 1961, long term capital gains on the sale of residential property will be exempt if the sale proceeds are invested in a eligible startup, provided such transfer took place prior to March 31, 2019. As per the latest full Budget 2019-20, this has now been extended to March 2021.
Important points on Capital Gains Tax & Sale of Land / Home
Agricultural land in a rural area in India it is not considered a Capital Asset, and therefore no capital gains are applicable on its sale.
While calculating capital gains, expenses related to transfer / sale like advertisement expenses, brokerage expense, Stamp duty, Sale deed registration fees, Legal (lawyer) expenses etc., can be deducted from the Purchase price.
Sale of a property that is inherited or accepted as a gift will also attract capital gain/loss provisions even though you haven’t spent any money to acquire it. In such a case, capital gains will be computed on the basis of the cost to the previous owner, indexed to the year of purchase.
If the cost of the new residential property is lower than the total sale amount, then the exemption is allowed proportionately.
The new property must only be bought on the name of the seller and not on anybody else’s name. Joint ownership can be acceptable but exemption can be limited to the share of ownership.
You must also remember that you are allowed to purchase or construct only one new asset from the capital gain that accrues. This means that you cannot make multiple property acquisitionsand thus seek to reduce your tax outgo. However, if you sell more than one property, you can invest the resulting cumulative capital gain amount in a single new property.
If you use the capital gain amount to clear loansthen tax on LTCG cannot be saved. No exemptions can be claimed.
Capital Gain Tax cannot be saved if the sale proceeds are invested in a commercial property, agricultural land or plot.
According to the latest amendments in the Income Tax Act, the residential property which is bought by re-investing the long-term capital gains must be situated in India.If you would like to buy a property outside India say in the US, you need to pay tax on the capital gain portion of the sale proceeds.
Categorize your capital gains i.e., Short term or Long term.
Calculate Short Term Capital Gains (STCG) / Long Term Capital Gains (LTCG).
If you have STCG, taxes are payable as per your income tax slab rate.
If you have LTCG, to save capital gains tax ;
You may invest the gains in another Residential property (or)
Buy Notified Bonds (or)
Temporarily invest in Capital Gains Account Schemes.
Else, you have to pay 20% on your Long Term Capital Gains.
Calculation of Capital Gains Tax on sale of property can be sometimes be a tricky one. It is advisable to exercise caution when claiming Capital Gains Tax Exemptions. When in doubt, kindly consult a tax expert or a Chartered Accountant.
(Image courtesy of Stuart Miles at FreeDigitalPhotos.net)
This post was last modified on September 28, 2023 6:32 pm
Sreekanth Reddy
Sreekanth is the Man behind ReLakhs.com. He is an Independent Certified Financial Planner (CFP), engaged in blogging & property consultancy for the last 14 years through his firm ReLakhs Financial Services . He is not associated with any Financial product / service provider. The main aim of his blog is to "help investors take informed financial decisions." "Please note that the views given in this Blog/Comments Section/Forum are clarifications meant for reference and guidance of the readers to explore further on the topics/queries raised and take informed decisions. The information provided, therefore, should not be viewed as financial, legal, accounting, tax or investment advice."
Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.
how do I invest in these bonds can these be done through SBI?
And once after 3 years can I reinvest the entire amount into another project or will I still be liable to pay capital gain tax.
Dear Ajith,
Yes, you can invest through SBI.
After three years you pay tax only on the interest amount generated from these bonds. Entire investment amount (the capital gain amount that you have invested) will not be taxed, you may re-invest for any other purposes.
Thank you Sreekanth
Hi,
Sir I am a business man, Having a hardware shop, the TO of my business is in and around 875000/- pa. what is my problem is that . i am going to file my IT return for the first time for the FY 2015-16 and 2016-17. During the period of 2015-16 i sold one of my property for a gain of almost 20 lakhs and the entire amount was received in cash. i invested the entire amount in FD in my name and spouse name in cooperative bank A/c.. My doubt is that whether i have to show this transaction in my ITR or can i ignore the same... If not suggest some other way... one more the bank authority has taken my wife and my Pan card..
Proprty Detail....
Purchase Value 4.5L
Sale Value 7.5L
Holing period more than 3ys
Sale and purchase value is as per document....
Dear Akshith,
Yes, you need to include the Capital Gains on sale of property in your income tax return and pay taxes on Gains.
Suggest you to kindly take help of a Chartered Accountant and file your ITRs.
DEAR SIR,
MY QUESTION IS I HAVE SALE A FLAT . AND PURCHASE AGRICULTURE LAND WITHIN 3 MONTH CAN I SAVE TAX... THIS IS RIGHT WAY
Dear DINESH ..No, you can save tax on Capital gains by investing the proceeds in an Agri land.
I booked a flat in Nov 2013 which is under construction for 60 Lakh. I have paid 47 lakhs through loan and savings. The balance amount is yet to be paid. The flat is expected to be delivered by mid 2018.
I have sold my only residential flat now i.e Jun 2017. The purchase price was 27 Lakh in 2008 and now sold for 89Lakh. Capital gain is approx 37 Lakh.
Can I save tax on long term capital gain by showing the investment of 37Lakh in the new house which I booked in 2013 and being handed over in 2018.
Dear Sajeev ..I dont think it is possible.
Hi Sreekanth,
I sold my residential plot during April 2017 for Rs.33 Lakh. I have spent 8 lakhs for my personal use.
I'm planning to buy another plot for Rs.55 Lakh by using Rs.25 Lakh out of Rs.33 Lakh.
Remaining 30 Lakh (55-25), I'm planning to take loan. Please let me know whether I have to pay capital gains tax in this scenario.
Thanks,
Kumar
Dear Kumar,
If you are planning to use the sale proceeds to buy just a vacant plot then you can not claim tax exemption on Capital gains.
Thanks Sreekanth.But is it not mandatory to construct a house in the vacant plot? to save tax. Kindly let me know
Thanks,
Kumar
Dear Kumar,
There was typo error in my previous comment, corrected it now.
Yes, it is mandatory to construct house to claim tax exemption..
Hello Sreekanth,
Request your advise on following queries?
So as I understood that any interest paid to the Bank can be considered in calculating Cost of Acquisition of Asset for the Calculation of Short Term Capital Gain / Loss; is my understanding OK?
Secondly, I wish to know - For a certain property, me and my wife jointly applied for the loan (since she would not have individually qualified for the required Loan Amount) and bought a under-construction property in joint name. The Loan was regularly serviced through monthly earnings of my wife. We sold the property in 2015 in less than 3 years during construction period itself; upon considering Bank Interest as Cost of Acquisition of Asset - it turned out to be Short Term Loss. In this case, since most of the EMI's were paid by my wife, Can she be the Sole IT Assessee having Short Term Loss on her ITR or can there be any other split other than 50:50 for Short Term Capital Loss incurred?
Thirdly, we can use this Short Term Capital Loss as above to Offset any Long Term Capital Gain in the subsequent years, if any?
Thanks
Vikramaditya
Dear Vikramaditya,
Kindly note that both your queries are debatable. Hence, suggest you to consult a CA in this regard.
Read : How to set off Capital loss?
Hello Sir,
Thanks for the article. i am from UP and owns two flats, first is in my name and the second one is jointly with my wife. I purchased the first flat in 2008 @ 15 lakhs+1 lack registry (approx) and now planned to sale this flat for 39 lacs. this is only in my name.
1. How much is capital gain amount in my case.
2. Can i deposit the received amount in savings account, if yes, what amount full or only the capital gain amout and for how long. Or i need to deposit the full amount in only capital gain account?
3. Can i invest this amount in under construction residential property.
4. Can i pay my second home loan with capital gain amount?
Regards,
Dear manoj,
1 - Kindly consult a Chartered Accountant for calculations.
2 - Advisable to receive full amount (Registered Sale value) in your bank account.
3 - Yes.
4 - You can use the amount to repay home loan but there is no tax exemption provision on LTCG.
Dear Sreekanth,
Thanks for an excellent article on LTCG tax on sale of a plot of land. I have 3 queries:
1) If I use part of the LTCG due to sale of a plot of land to buy a new residential apartment and invest the remaining amount in REC/NHAI bonds within 6 months, will I not need to pay any capital gains tax ?
2) If I own one apartment in my name singly and another apartment jointly with my wife, if I invest LTCG due to sale of a lot of land into buying a 3rd apartment, will I be eligible for saving capital gains under Section 54F?
3) If my mother owns a residential apartment and I buy that from her using LTCG, can I claim CG tax benefit under Section 54F ?
Would appreciate a response from you on my above queries.
Regards,
Murali R
Dear Murali,
1 - No.
2 & 3 - No. Kindly note that you should not own more than one residential house prior to making new investment.
Dear Sreekanth,
Thanks a lot. One more query - if the land is owned by myself and my spouse jointly and if the LTCG on its sale is, say, INR 1 crore - can I and my spouse split this LTCG and invest INR 50 lakhs each in notified bonds and claim CG exemption in our respective IT returns?
Regards,
Murali
Dear Murali ..Yes, by default the ownership ratio in jointly held properties is 50:50, unless if anything specifically mentioned in the Sale deed.
Hello Srikanth,
Request your response on following queries:
1. One of the statements you made is "If you are unable to invest the sale proceeds in any of the above options before the date of income tax returns filing "; my question around this is when you say date of income tax filing; are you referring to the date for the filing of the FY in which Asset Sale takes place. For example; we're staring at the date for filing taxes for FY 2016-2017 however if any capital sale happens now; it will be for FY 2017-2018. So which date of income tax filing are you referring to here?
2. For short term gain / loss calculation: does the cost of acquisition include any bank interest payments? For ex. if somebody took a loan however sold the property before 2 years; interest paid during this time to the bank; will it be included in the short term gain / loss calculation?
3. There are several instances of delay by builders these days in handing over the property. I took a bank loan and made 100% down-payment to builder for an under construction apartment in 2006; the builder could only get it completed in 2017 and registered in 2017. Although the registration stamp duty was also paid in 2015. I plan to sell the asset now in 2017. From taxation point of view - will this be considered under short term or long term calculation?
Pls advise...
Thanks
Vikramaditya
Dear Vikramaditya,
1 - If date of sale happens in FY 2017-18,then we are referring to Assessment year filing date which can be in July 2018.
2 - Your Home Loan EMI consists of Principal and Interest component. The principal component is allowed as deduction under Section 80C. However, if you sell your residential house within five years, you may have to forgo your tax benefits. The entire amount of deduction claimed under Section 80C in prior years on the amount of the principal repayment will be added to the taxable income in the year of sale of the property. Also, no income tax deductions shall be allowed in respect of repayments made during the year of sale of the property.
Kindly note that this rollback is applicable only to deduction(s) claimed under Section 80C. Deductions claimed under Section 24 (b) on interest payable on your home loan will not be withdrawn.
You can include the Interest Cost in your Cost of Acquisition if it is solely for the purpose of Buying the property. But be prepared as it is a debatable point and can be subject to litigation.
3 - It is debatable. Kindly consult a CA in person and take advice. (Mostly this can be considered as LTCG, if any)
Dear sir,
I want to sale one old house with 22 lacks on June 2017 capital gain Rs 19.5 lacs
against sale i want purchase one Flat Rs 28 Lacs it is under construction will be completed by dec 2018. and i want to take bank loan for total 28 lacs ? and i want to use home loan interest for my IT exemption?
and i want purchase one PLOT with 14 lacs without any loan and house will not be constructed now.
by doing those sale and purchase can i get capital gain exception with out paying tax
appalaraju
Dear appalaraju .. If you are not using the sale proceeds to buy a new home then no tax exemption is allowed (also, for plot, the construction has to be completed within 3 years).
View Comments
Srikanth,
Going by the below point under section 54 e/c
Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.
how do I invest in these bonds can these be done through SBI?
And once after 3 years can I reinvest the entire amount into another project or will I still be liable to pay capital gain tax.
Dear Ajith,
Yes, you can invest through SBI.
After three years you pay tax only on the interest amount generated from these bonds. Entire investment amount (the capital gain amount that you have invested) will not be taxed, you may re-invest for any other purposes.
Thank you Sreekanth
Hi,
Sir I am a business man, Having a hardware shop, the TO of my business is in and around 875000/- pa. what is my problem is that . i am going to file my IT return for the first time for the FY 2015-16 and 2016-17. During the period of 2015-16 i sold one of my property for a gain of almost 20 lakhs and the entire amount was received in cash. i invested the entire amount in FD in my name and spouse name in cooperative bank A/c.. My doubt is that whether i have to show this transaction in my ITR or can i ignore the same... If not suggest some other way... one more the bank authority has taken my wife and my Pan card..
Proprty Detail....
Purchase Value 4.5L
Sale Value 7.5L
Holing period more than 3ys
Sale and purchase value is as per document....
Dear Akshith,
Yes, you need to include the Capital Gains on sale of property in your income tax return and pay taxes on Gains.
Suggest you to kindly take help of a Chartered Accountant and file your ITRs.
DEAR SIR,
MY QUESTION IS I HAVE SALE A FLAT . AND PURCHASE AGRICULTURE LAND WITHIN 3 MONTH CAN I SAVE TAX... THIS IS RIGHT WAY
Dear DINESH ..No, you can save tax on Capital gains by investing the proceeds in an Agri land.
I booked a flat in Nov 2013 which is under construction for 60 Lakh. I have paid 47 lakhs through loan and savings. The balance amount is yet to be paid. The flat is expected to be delivered by mid 2018.
I have sold my only residential flat now i.e Jun 2017. The purchase price was 27 Lakh in 2008 and now sold for 89Lakh. Capital gain is approx 37 Lakh.
Can I save tax on long term capital gain by showing the investment of 37Lakh in the new house which I booked in 2013 and being handed over in 2018.
Dear Sajeev ..I dont think it is possible.
Hi Sreekanth,
I sold my residential plot during April 2017 for Rs.33 Lakh. I have spent 8 lakhs for my personal use.
I'm planning to buy another plot for Rs.55 Lakh by using Rs.25 Lakh out of Rs.33 Lakh.
Remaining 30 Lakh (55-25), I'm planning to take loan. Please let me know whether I have to pay capital gains tax in this scenario.
Thanks,
Kumar
Dear Kumar,
If you are planning to use the sale proceeds to buy just a vacant plot then you can not claim tax exemption on Capital gains.
Thanks Sreekanth.But is it not mandatory to construct a house in the vacant plot? to save tax. Kindly let me know
Thanks,
Kumar
Dear Kumar,
There was typo error in my previous comment, corrected it now.
Yes, it is mandatory to construct house to claim tax exemption..
Hello Sreekanth,
Request your advise on following queries?
So as I understood that any interest paid to the Bank can be considered in calculating Cost of Acquisition of Asset for the Calculation of Short Term Capital Gain / Loss; is my understanding OK?
Secondly, I wish to know - For a certain property, me and my wife jointly applied for the loan (since she would not have individually qualified for the required Loan Amount) and bought a under-construction property in joint name. The Loan was regularly serviced through monthly earnings of my wife. We sold the property in 2015 in less than 3 years during construction period itself; upon considering Bank Interest as Cost of Acquisition of Asset - it turned out to be Short Term Loss. In this case, since most of the EMI's were paid by my wife, Can she be the Sole IT Assessee having Short Term Loss on her ITR or can there be any other split other than 50:50 for Short Term Capital Loss incurred?
Thirdly, we can use this Short Term Capital Loss as above to Offset any Long Term Capital Gain in the subsequent years, if any?
Thanks
Vikramaditya
Dear Vikramaditya,
Kindly note that both your queries are debatable. Hence, suggest you to consult a CA in this regard.
Read : How to set off Capital loss?
Hello Sir,
Thanks for the article. i am from UP and owns two flats, first is in my name and the second one is jointly with my wife. I purchased the first flat in 2008 @ 15 lakhs+1 lack registry (approx) and now planned to sale this flat for 39 lacs. this is only in my name.
1. How much is capital gain amount in my case.
2. Can i deposit the received amount in savings account, if yes, what amount full or only the capital gain amout and for how long. Or i need to deposit the full amount in only capital gain account?
3. Can i invest this amount in under construction residential property.
4. Can i pay my second home loan with capital gain amount?
Regards,
Dear manoj,
1 - Kindly consult a Chartered Accountant for calculations.
2 - Advisable to receive full amount (Registered Sale value) in your bank account.
3 - Yes.
4 - You can use the amount to repay home loan but there is no tax exemption provision on LTCG.
Dear Sreekanth,
Thanks for an excellent article on LTCG tax on sale of a plot of land. I have 3 queries:
1) If I use part of the LTCG due to sale of a plot of land to buy a new residential apartment and invest the remaining amount in REC/NHAI bonds within 6 months, will I not need to pay any capital gains tax ?
2) If I own one apartment in my name singly and another apartment jointly with my wife, if I invest LTCG due to sale of a lot of land into buying a 3rd apartment, will I be eligible for saving capital gains under Section 54F?
3) If my mother owns a residential apartment and I buy that from her using LTCG, can I claim CG tax benefit under Section 54F ?
Would appreciate a response from you on my above queries.
Regards,
Murali R
Dear Murali,
1 - No.
2 & 3 - No. Kindly note that you should not own more than one residential house prior to making new investment.
Dear Sreekanth,
Thanks a lot. One more query - if the land is owned by myself and my spouse jointly and if the LTCG on its sale is, say, INR 1 crore - can I and my spouse split this LTCG and invest INR 50 lakhs each in notified bonds and claim CG exemption in our respective IT returns?
Regards,
Murali
Dear Murali ..Yes, by default the ownership ratio in jointly held properties is 50:50, unless if anything specifically mentioned in the Sale deed.
Hello Srikanth,
Request your response on following queries:
1. One of the statements you made is "If you are unable to invest the sale proceeds in any of the above options before the date of income tax returns filing "; my question around this is when you say date of income tax filing; are you referring to the date for the filing of the FY in which Asset Sale takes place. For example; we're staring at the date for filing taxes for FY 2016-2017 however if any capital sale happens now; it will be for FY 2017-2018. So which date of income tax filing are you referring to here?
2. For short term gain / loss calculation: does the cost of acquisition include any bank interest payments? For ex. if somebody took a loan however sold the property before 2 years; interest paid during this time to the bank; will it be included in the short term gain / loss calculation?
3. There are several instances of delay by builders these days in handing over the property. I took a bank loan and made 100% down-payment to builder for an under construction apartment in 2006; the builder could only get it completed in 2017 and registered in 2017. Although the registration stamp duty was also paid in 2015. I plan to sell the asset now in 2017. From taxation point of view - will this be considered under short term or long term calculation?
Pls advise...
Thanks
Vikramaditya
Dear Vikramaditya,
1 - If date of sale happens in FY 2017-18,then we are referring to Assessment year filing date which can be in July 2018.
2 - Your Home Loan EMI consists of Principal and Interest component. The principal component is allowed as deduction under Section 80C. However, if you sell your residential house within five years, you may have to forgo your tax benefits. The entire amount of deduction claimed under Section 80C in prior years on the amount of the principal repayment will be added to the taxable income in the year of sale of the property. Also, no income tax deductions shall be allowed in respect of repayments made during the year of sale of the property.
Kindly note that this rollback is applicable only to deduction(s) claimed under Section 80C. Deductions claimed under Section 24 (b) on interest payable on your home loan will not be withdrawn.
You can include the Interest Cost in your Cost of Acquisition if it is solely for the purpose of Buying the property. But be prepared as it is a debatable point and can be subject to litigation.
3 - It is debatable. Kindly consult a CA in person and take advice. (Mostly this can be considered as LTCG, if any)
Dear sir,
I want to sale one old house with 22 lacks on June 2017 capital gain Rs 19.5 lacs
against sale i want purchase one Flat Rs 28 Lacs it is under construction will be completed by dec 2018. and i want to take bank loan for total 28 lacs ? and i want to use home loan interest for my IT exemption?
and i want purchase one PLOT with 14 lacs without any loan and house will not be constructed now.
by doing those sale and purchase can i get capital gain exception with out paying tax
appalaraju
Dear appalaraju .. If you are not using the sale proceeds to buy a new home then no tax exemption is allowed (also, for plot, the construction has to be completed within 3 years).