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."
Hi Sreekanth, have one query, I am going to sale 2 residential plots in my name which I purchased in year 2006 and 2008. The LTCG part is about 18 lacs out of 28 lacs of sale proceeds of both the plots. I am going to buy 2 plots again out of entire LTCG i.e. for about 18.5 Lacs. I am staying in my own flat bought in 1996, and do not plan to construct house on the 2 new plots I am buying. Can I save LTCG?
Will it make difference if I buy new plots jointly in name of me and my wife?
Second part if query is I had booked a new flat in 2011, for which I have already paid 90% and will get possession by the end of 2017. Can I utilise this LTCG against this flat. I shall also sell my old flat after getting possession of the new flat.. So either I should utilise LTCG which will arise by selling the old flat.
Request your guidance.
Dear Ajay,
Suggest you to consult a CA and take help.
HELLO SIR, I HAD SOLD MY FLAT FOR 38 LAKHS AND PAID ABOUT 3.70 LAKH ARREAR OF MAINTAINENCE AND COMMSION OF SELLING HOUSE AND DEPOSITED BALANCE AMONT IN CAPITAL GAIN ACCOUNT. NOW I AM PURCHASING HOUSE FOR 42 LAKHS AND I HAVE TAKEN LOAN OF 12 LAKHS, WHERE AS I AM MAKING PAYMENT OF 30LAKH FROM MY CAPITAL GAIN ACCOUNT & 12 LAKHS FROM BANK LOAN AND I AM LEFT WITH 4 LAKHS IN MY CAPITAL GAIN ACCOUNT. CAN I USE THESE 4 LAKHS AMOUNT FOR REGISTRATION OF HOUSE AND WOOD WORK. PLEASE REPLY.
Dear Manoj..Instead of taking loan for Rs 12 Lakh, you may use the remaining amount right???
Dear Sir,
Does purchase of farm house plot and construction to the tune of 0.4 FSI as per allowed FSI rules for farm house plots qualify to offset the LTCG against proceeds received from the sale of a residential property.
Kindly clarify.
Dear Ramesh,
Kindly note that as long as both the properties are i.e. property sold and the property bought to save capital gain tax are residential properties (not used for commercial purposes), can claim tax exemption on LTCG.
Kindly consult a CA.
Dear Shreekant,
My father has recently purchase a property for Rs. 40 lacs.
He is also planning to sell another property within a year. The sale process will be approx. 80 lacs. He has purchased this property in year 2000 for Rs. 9 lacs. Now my queries are:
1 . >> How much LTCG will arise
2. >> Can we set off LTCG against purchase of a property which we have purchased last year.
3.>> If still some LTCG remains for set off , then is there any way to save LTCG
Dear Nikhil,
1 - LTCG can be around Rs 55 Lakh (Sale price @ 80 L in 2016-17 and Cost price @ 9 Lakh in 2000)
2 - Rs 40 Lakh one - May I know what type of properties are these?
3 - You can invest in 54EC Bonds (kindly refer to the points in the article).
Hi Sir
We brought a flat at 1.18 Cr in JAN 2016. Some reasons we need to sale the flat , selling price for it will be around 1.25-1.30 Cr.
During purchase loan was availed from LIC of about 86 lakhs
Own investment was - 32 lakhs
Plus registration / stamp duty
Now if we sell the flat, can we save the STCG in any form and what would be approximate tax value?
Dear Shivani,
There are no provisions to save taxes on STCG.
The tax amount depends on the income tax slab rate that is applicable to you.
"Short Term Capital Gains are included in your taxable income and taxed at applicable income tax slab rates."
What will be the short term capital gain incurreed? Is the initial registration + brokerage charges exempted from the gain
Selling price is 1.26 all inclusive of registration
Dear Shivani..You can deduct 'cost of transfer' on sale of property.
Cost of transfer is a brokerage paid for arranging the deal, legal expenses incurred, cost of advertising, etc.
Dear Sreekanth
I have the following property
1 ) Ancestral property built my father in 1976 ( say A ). After our parents demise , we ( 4 siblings ) found a buyer and done an agreement with the buyer to sell the property on 10th July 2016. We got 90 % on agreement in July 2016 & we will get remaining 10 % on transfer of property to the buyer ( i.e registration in buyers name ) .I got in my name a share of 36 lakhs ( 90 % ).The transfer may be possible in this FY or in next FY .
2 ) I & my wife purchased a flat ( Say B ) in joint name , the registration ( Transfer ) done on March 2016 . The tax benefit on bank loan was taken by me . The entire bank loan was prepaid by me in June 2016 .
My Questions are >>>
A ) How the LTCG will be calculated on property A since cost inflation index started from 1981 /82 . Is there any process or the entire amount will be taxable ?
B ) If I want to take tax exemption of LTCG either by purchasing property ( within 2 years for new property or 1 year back for purchased property ) or investing in bonds ( within 6 months ) ,will the day count be started from July 2016 ( for 90 % or for 100 % ) Or it will be counted after transfer .
C ) Can I get the tax exemption of LTCG by showing it against property B ( because :it is in joint name , already transferred just 5 months back from July 2016 & the bank loan prepaid before July 2016 ) .
Dear Man mohan,
A) As the property (A) was purchased prior to 1980, you can visit the registration office to get to know the Fair Market value of similar properties in the same locality during that period of time (OR) you can consult Govt approved 'Valuer' to arrive at and certify the Fair market value and issue you a document.
You can then use this FMV and index inflation number at base rate ie 100 (1981) and then calculate LTCG.
B) Agreement of Sale can be considered as date of transfer.
c) This is tricky, as you have bought the property using home loan. Suggest you to consult a CA.
Dear Sreekanth .
Thanks for the reply , i decided to invest the entire amount in LTCG bonds .I received 36 lakhs ( 90 % )on signing the agreement on 10/7/2016. I will get the remaining 4 lakhs ( 10 % ) at the time of transfer of the property .The transfer is on process & may be done in FY 2016-17 or 2017-18. What will be the limit date for 36 lakh & remaimg 4 lakh ?
Dear Manmohan ,
You need to invest within six months from the date of sale of capital asset.
So, it depends on the Date of Registration.
Dear Mr. Sreekanth Reddy,
My friend earned Capital Gain of Rs. 75,00,000/- on Sale of Residential House Property (after netting off indexed cost of acquisition). He invested Rs. 50,00,000/- in long term specified asset (Bonds of NHAI) and balance amount of Rs. 25,00,000/- in SBI Capital Gains Accounts Scheme. Is this eligible for full exemption from LTCG.
Dear Pravin,
Yes, eligible.
But kindly note that CGAS is a stop-gap arrangement only, as the funds have to be used to buy or build a house within the period specified. Kindly note that interest earned on this account is taxable.
Sir,
Thank you very much for your response.
However, while finalizing Order u/s 143(1), CPC has not considered the full amount u/s 54EC (They have considered only Rs. 50,00,000/- of NHAI Bonds). Whether both (i.e. NHAI Bonds and Capital Gain Accounts Scheme) are eligible u/s 54 EC or both are to be mentioned under different sections in the ITR.
Thanks n Regards
Pravin
Dear Pravin..I believe that there is no separate section for claiming the amount invested in CGAS account. The interest earned on this account has to be added to the income earned from other sources and taxes have to be paid accordingly.
Whenever you file your income tax returns, you will need to furnish a proof of your CGAS bank account to get tax exemption. A proof should be attached along with your ITR form for each financial year.
Dear Sir,
My father bought a land in 1976 at a price of Rs 10000/- only. We have sold it this year at a price of 15 lakhs. We are planning to buy another plot, price of which is approx 20 lakhs. Now my query is as the purchase cost of new land is more than the selling price of the old one - a) Do we need to pay any LTCG tax? (b) In case of land if the purchase price of a new land is more than the selling price of old land and if we do not build any residential house within the 3 year time frame do we need to pay any tax (as the above article says building a residential house only helps in saving the LTCG tax...)?
Thanks in advance.
Rajarshi.
Dear Rajarshi,
a - No.
b - Yes, the construction has to be done within 3 years. Else, the LTCG claimed earlier will be added to your income and has to pay tax as per your income tax slab rate.
Dear Shreekantji,
After sale of property we think to save capital gain but here my query is before sale if i purchase a residential plot out of advance taken from party to whom i suppose to sale my residential plot adjacent to him after six months. can i get capital gain tax exemption anyway for above transaction sale and purchase of propertry ? kindly clarify.
Dear Mr Rao,
If the purchaser has paid the full price and has taken the possession of property then you can use the proceeds to buy a plot and then has to construct a residential house within 3 years of sale of first property.
"Section 53A of the Transfer of Property Act envisages situations where under a contract for transfer of an immovable property, the purchaser has paid the price and has taken possession of the property, but the conveyance is either not executed or if executed is not registered. In such cases the transferer is debarred from agitating his title to the property against the purchaser.
The act of giving possession of an immovable property in part performance of a contract is treated as ‘transfer’ for the purposes of capital gains. This extended meaning of transfer applies also to cases where possession is already with the purchaser and he is allowed to retain it in part performance of the contract. "
Hi further to my question asked below since in my case LTCG exemption will be reversed
1) now does it means that I will have to pay tax on old house sold. Sale price - cost price x 20% LTCG
2) or is it sale price of new house - cost price of new house x tax slab rate
3) or is it sale price of old house - sale price of new house x tax slab rate
Request your help on both the questions as confusion arises due to selling of new house within 3 years
Dear Dheer,
If the new property is sold within a period of three years, the earlier LTCG exemption claimed with respect to the old property shall be revoked and the capital gain on old property becomes taxable at the income tax slab rate that is applicable to the individual.
(The calculation is done like this - The entire LTCG on sale of old property will be deducted from the cost of acquisition of your new property and you need to pay tax on STCG gains at the tax slab rate).
thank you sir, i still have doubt on cost of acquisition so.better i give break up as below of entire case.
Old house agreement cost : 72880 Aug 1999
Old house sale cost : 2500000 June 2013
LTCG 72880 * 939/389 = 175924-2500000=2324076
New house agreement cost 2492100 Dec 2013
Stamp duty 149256
Reg 28921
Other charges like clubhouse , maintainence , developer charge , service tax Vat total = 329846
Total cost of new house : 3000123
New house resale agreement value : 3150000 date July 2016
no expenses incurred while selling
here what will.be cost of acquisition on new house
1) agreement value 2492100
2) agval+stamp+reg= 2666700
3) or total cost paid 3000123
some.say maintaimce club cjgs etc are not to b included
2) i am jobless and no salary income till now in this FY. i domt want to.risk proceeds runming out
can i pay tax on above txn now and say if i get job rest later
3) i witdrew 2.9 lacs fromy ppf account in aug 2016, now can i put back 1.5 lac back to claim deduction from above txn
thanks
Dear Dheer,
Since you have sold the new property within 3 years, the acquisition cost of the new house will be agreement value + expenses - LTCG on first property. So, your Short term capital gains in this FY will increase and the taxes have to be paid as per the applicable IT slab rate.
2 - Taxes have to be paid in this FY 2016-17 (AY 2017-18).
3 - I did not understand your query. Did you withdraw PF before 5 years of service?
Sorry sir its still unclear to me.what happens to the value at which i SOLD the new house? will it not appear in any calculations.
So if
purchase Cost of new house= 2666700 minus
LTCG = 2324076
it comes to 342624 this is tax amount i have to pay or is it the amount ON which i have to pay tax=9539 as per my slab
I am under impression that i have to deduct the differnce from the SALE value of new house i.e 3150000-342624=2807376 on which my tax will be 687209
2) what i meant was can i pay the tax say next month so that i dont risk running out of money at year end as i have no income.
3)I withdrew from my PPF account not PF
Thanks
Dear Dheer,
If your new property acquisition cost is Rs 26.67 Lakh then deduct LTCG on first property ie Rs 23.24 Lakh which is Rs 3.43 Lakh.
The sale value of new property is Rs 31.5 Lakh so STCG is Rs 31.5 Lakh - Rs 3.43 Lakh which is Rs 28.07 Lakh.
You have to pay taxes on this STCG at applicable slab rate.
2 - If the tax liability is more than Rs 10,000 you have to pay advance tax now itself, else you have to pay penalty + tax liability when filing your Income tax return. Kindly take help of a CA.
greetings mr.reddy,
i contacted a local ca here his views differ very much from above as under
1) he says pay 20.6% tax on.ltcg of first propery i.e 23.24*20.6
2) as for stcg 31.5 - 300123(total cost of acq of new house, not 26.67 in above example=149877 which is not taxabke since below exempt limit as i habe ni income as of now.
in a nutshell he has not clubber old house and new house txn togegher.
isnit appropriate?
Ok sir now I got the calculations now BUT BUt still not sure whether to also deduct clubhouse charges , advance maintainence, , , development chgs vat and service tax as mentioned above from purchase value of new flat 31.5 lacs
Also I am yet to receive sales proceeds from buyers bank, expecting the same within 10 days , so when do I pay advance tax and can I deposit amount in PPF , claim deduction while paying this tax.
Dear Dheer ..I believe that expenses like maintenance charges can not be deducted.
Tax deductions like PPF can be claimed when you file your ITR.
Thanx a lot sir for help
Hi again i omitted to mention the LTCG in ITR filed next year. What is the remedy now . Also now that LTCG is revoked and I am paying advance tax shortly it do I have to mention it now?
Dear Dheer ..Kindly consult a CA and take help.
Sir,
plz suggest. my father built a house in the year 1992-93 ,costing abought 1000000. Now if he sell this house for 7000000. the capital gane= 7000000-(1000000*1125/223)=7000000-5044843=1955157.
I thought that he can go for bond of rs 1955157 and remaing rs he can gifted to me..and i can bought a new flat.
but my adviser said he cannot gift the amount to me, my father have to purchase a new house in his name and the remaining amount( 7000000-New flat price)he can go for bond,
or he can give tax 20% on 1955157 and remaining he can give to me.
Is it sir?
Dear Mr mukherjee,
I believe that he can gift the amount to you and this amount is tax-free.
Read: Gifts & income tax implications.
View Comments
Hi Sreekanth, have one query, I am going to sale 2 residential plots in my name which I purchased in year 2006 and 2008. The LTCG part is about 18 lacs out of 28 lacs of sale proceeds of both the plots. I am going to buy 2 plots again out of entire LTCG i.e. for about 18.5 Lacs. I am staying in my own flat bought in 1996, and do not plan to construct house on the 2 new plots I am buying. Can I save LTCG?
Will it make difference if I buy new plots jointly in name of me and my wife?
Second part if query is I had booked a new flat in 2011, for which I have already paid 90% and will get possession by the end of 2017. Can I utilise this LTCG against this flat. I shall also sell my old flat after getting possession of the new flat.. So either I should utilise LTCG which will arise by selling the old flat.
Request your guidance.
Dear Ajay,
Suggest you to consult a CA and take help.
HELLO SIR, I HAD SOLD MY FLAT FOR 38 LAKHS AND PAID ABOUT 3.70 LAKH ARREAR OF MAINTAINENCE AND COMMSION OF SELLING HOUSE AND DEPOSITED BALANCE AMONT IN CAPITAL GAIN ACCOUNT. NOW I AM PURCHASING HOUSE FOR 42 LAKHS AND I HAVE TAKEN LOAN OF 12 LAKHS, WHERE AS I AM MAKING PAYMENT OF 30LAKH FROM MY CAPITAL GAIN ACCOUNT & 12 LAKHS FROM BANK LOAN AND I AM LEFT WITH 4 LAKHS IN MY CAPITAL GAIN ACCOUNT. CAN I USE THESE 4 LAKHS AMOUNT FOR REGISTRATION OF HOUSE AND WOOD WORK. PLEASE REPLY.
Dear Manoj..Instead of taking loan for Rs 12 Lakh, you may use the remaining amount right???
Dear Sir,
Does purchase of farm house plot and construction to the tune of 0.4 FSI as per allowed FSI rules for farm house plots qualify to offset the LTCG against proceeds received from the sale of a residential property.
Kindly clarify.
Dear Ramesh,
Kindly note that as long as both the properties are i.e. property sold and the property bought to save capital gain tax are residential properties (not used for commercial purposes), can claim tax exemption on LTCG.
Kindly consult a CA.
Dear Shreekant,
My father has recently purchase a property for Rs. 40 lacs.
He is also planning to sell another property within a year. The sale process will be approx. 80 lacs. He has purchased this property in year 2000 for Rs. 9 lacs. Now my queries are:
1 . >> How much LTCG will arise
2. >> Can we set off LTCG against purchase of a property which we have purchased last year.
3.>> If still some LTCG remains for set off , then is there any way to save LTCG
Dear Nikhil,
1 - LTCG can be around Rs 55 Lakh (Sale price @ 80 L in 2016-17 and Cost price @ 9 Lakh in 2000)
2 - Rs 40 Lakh one - May I know what type of properties are these?
3 - You can invest in 54EC Bonds (kindly refer to the points in the article).
Hi Sir
We brought a flat at 1.18 Cr in JAN 2016. Some reasons we need to sale the flat , selling price for it will be around 1.25-1.30 Cr.
During purchase loan was availed from LIC of about 86 lakhs
Own investment was - 32 lakhs
Plus registration / stamp duty
Now if we sell the flat, can we save the STCG in any form and what would be approximate tax value?
Dear Shivani,
There are no provisions to save taxes on STCG.
The tax amount depends on the income tax slab rate that is applicable to you.
"Short Term Capital Gains are included in your taxable income and taxed at applicable income tax slab rates."
What will be the short term capital gain incurreed? Is the initial registration + brokerage charges exempted from the gain
Selling price is 1.26 all inclusive of registration
Dear Shivani..You can deduct 'cost of transfer' on sale of property.
Cost of transfer is a brokerage paid for arranging the deal, legal expenses incurred, cost of advertising, etc.
Dear Sreekanth
I have the following property
1 ) Ancestral property built my father in 1976 ( say A ). After our parents demise , we ( 4 siblings ) found a buyer and done an agreement with the buyer to sell the property on 10th July 2016. We got 90 % on agreement in July 2016 & we will get remaining 10 % on transfer of property to the buyer ( i.e registration in buyers name ) .I got in my name a share of 36 lakhs ( 90 % ).The transfer may be possible in this FY or in next FY .
2 ) I & my wife purchased a flat ( Say B ) in joint name , the registration ( Transfer ) done on March 2016 . The tax benefit on bank loan was taken by me . The entire bank loan was prepaid by me in June 2016 .
My Questions are >>>
A ) How the LTCG will be calculated on property A since cost inflation index started from 1981 /82 . Is there any process or the entire amount will be taxable ?
B ) If I want to take tax exemption of LTCG either by purchasing property ( within 2 years for new property or 1 year back for purchased property ) or investing in bonds ( within 6 months ) ,will the day count be started from July 2016 ( for 90 % or for 100 % ) Or it will be counted after transfer .
C ) Can I get the tax exemption of LTCG by showing it against property B ( because :it is in joint name , already transferred just 5 months back from July 2016 & the bank loan prepaid before July 2016 ) .
Dear Man mohan,
A) As the property (A) was purchased prior to 1980, you can visit the registration office to get to know the Fair Market value of similar properties in the same locality during that period of time (OR) you can consult Govt approved 'Valuer' to arrive at and certify the Fair market value and issue you a document.
You can then use this FMV and index inflation number at base rate ie 100 (1981) and then calculate LTCG.
B) Agreement of Sale can be considered as date of transfer.
c) This is tricky, as you have bought the property using home loan. Suggest you to consult a CA.
Dear Sreekanth .
Thanks for the reply , i decided to invest the entire amount in LTCG bonds .I received 36 lakhs ( 90 % )on signing the agreement on 10/7/2016. I will get the remaining 4 lakhs ( 10 % ) at the time of transfer of the property .The transfer is on process & may be done in FY 2016-17 or 2017-18. What will be the limit date for 36 lakh & remaimg 4 lakh ?
Dear Manmohan ,
You need to invest within six months from the date of sale of capital asset.
So, it depends on the Date of Registration.
Dear Mr. Sreekanth Reddy,
My friend earned Capital Gain of Rs. 75,00,000/- on Sale of Residential House Property (after netting off indexed cost of acquisition). He invested Rs. 50,00,000/- in long term specified asset (Bonds of NHAI) and balance amount of Rs. 25,00,000/- in SBI Capital Gains Accounts Scheme. Is this eligible for full exemption from LTCG.
Dear Pravin,
Yes, eligible.
But kindly note that CGAS is a stop-gap arrangement only, as the funds have to be used to buy or build a house within the period specified. Kindly note that interest earned on this account is taxable.
Sir,
Thank you very much for your response.
However, while finalizing Order u/s 143(1), CPC has not considered the full amount u/s 54EC (They have considered only Rs. 50,00,000/- of NHAI Bonds). Whether both (i.e. NHAI Bonds and Capital Gain Accounts Scheme) are eligible u/s 54 EC or both are to be mentioned under different sections in the ITR.
Thanks n Regards
Pravin
Dear Pravin..I believe that there is no separate section for claiming the amount invested in CGAS account. The interest earned on this account has to be added to the income earned from other sources and taxes have to be paid accordingly.
Whenever you file your income tax returns, you will need to furnish a proof of your CGAS bank account to get tax exemption. A proof should be attached along with your ITR form for each financial year.
Dear Sir,
My father bought a land in 1976 at a price of Rs 10000/- only. We have sold it this year at a price of 15 lakhs. We are planning to buy another plot, price of which is approx 20 lakhs. Now my query is as the purchase cost of new land is more than the selling price of the old one - a) Do we need to pay any LTCG tax? (b) In case of land if the purchase price of a new land is more than the selling price of old land and if we do not build any residential house within the 3 year time frame do we need to pay any tax (as the above article says building a residential house only helps in saving the LTCG tax...)?
Thanks in advance.
Rajarshi.
Dear Rajarshi,
a - No.
b - Yes, the construction has to be done within 3 years. Else, the LTCG claimed earlier will be added to your income and has to pay tax as per your income tax slab rate.
Dear Shreekantji,
After sale of property we think to save capital gain but here my query is before sale if i purchase a residential plot out of advance taken from party to whom i suppose to sale my residential plot adjacent to him after six months. can i get capital gain tax exemption anyway for above transaction sale and purchase of propertry ? kindly clarify.
Dear Mr Rao,
If the purchaser has paid the full price and has taken the possession of property then you can use the proceeds to buy a plot and then has to construct a residential house within 3 years of sale of first property.
"Section 53A of the Transfer of Property Act envisages situations where under a contract for transfer of an immovable property, the purchaser has paid the price and has taken possession of the property, but the conveyance is either not executed or if executed is not registered. In such cases the transferer is debarred from agitating his title to the property against the purchaser.
The act of giving possession of an immovable property in part performance of a contract is treated as ‘transfer’ for the purposes of capital gains. This extended meaning of transfer applies also to cases where possession is already with the purchaser and he is allowed to retain it in part performance of the contract. "
Hi further to my question asked below since in my case LTCG exemption will be reversed
1) now does it means that I will have to pay tax on old house sold. Sale price - cost price x 20% LTCG
2) or is it sale price of new house - cost price of new house x tax slab rate
3) or is it sale price of old house - sale price of new house x tax slab rate
Request your help on both the questions as confusion arises due to selling of new house within 3 years
Dear Dheer,
If the new property is sold within a period of three years, the earlier LTCG exemption claimed with respect to the old property shall be revoked and the capital gain on old property becomes taxable at the income tax slab rate that is applicable to the individual.
(The calculation is done like this - The entire LTCG on sale of old property will be deducted from the cost of acquisition of your new property and you need to pay tax on STCG gains at the tax slab rate).
thank you sir, i still have doubt on cost of acquisition so.better i give break up as below of entire case.
Old house agreement cost : 72880 Aug 1999
Old house sale cost : 2500000 June 2013
LTCG 72880 * 939/389 = 175924-2500000=2324076
New house agreement cost 2492100 Dec 2013
Stamp duty 149256
Reg 28921
Other charges like clubhouse , maintainence , developer charge , service tax Vat total = 329846
Total cost of new house : 3000123
New house resale agreement value : 3150000 date July 2016
no expenses incurred while selling
here what will.be cost of acquisition on new house
1) agreement value 2492100
2) agval+stamp+reg= 2666700
3) or total cost paid 3000123
some.say maintaimce club cjgs etc are not to b included
2) i am jobless and no salary income till now in this FY. i domt want to.risk proceeds runming out
can i pay tax on above txn now and say if i get job rest later
3) i witdrew 2.9 lacs fromy ppf account in aug 2016, now can i put back 1.5 lac back to claim deduction from above txn
thanks
Dear Dheer,
Since you have sold the new property within 3 years, the acquisition cost of the new house will be agreement value + expenses - LTCG on first property. So, your Short term capital gains in this FY will increase and the taxes have to be paid as per the applicable IT slab rate.
2 - Taxes have to be paid in this FY 2016-17 (AY 2017-18).
3 - I did not understand your query. Did you withdraw PF before 5 years of service?
Sorry sir its still unclear to me.what happens to the value at which i SOLD the new house? will it not appear in any calculations.
So if
purchase Cost of new house= 2666700 minus
LTCG = 2324076
it comes to 342624 this is tax amount i have to pay or is it the amount ON which i have to pay tax=9539 as per my slab
I am under impression that i have to deduct the differnce from the SALE value of new house i.e 3150000-342624=2807376 on which my tax will be 687209
2) what i meant was can i pay the tax say next month so that i dont risk running out of money at year end as i have no income.
3)I withdrew from my PPF account not PF
Thanks
Dear Dheer,
If your new property acquisition cost is Rs 26.67 Lakh then deduct LTCG on first property ie Rs 23.24 Lakh which is Rs 3.43 Lakh.
The sale value of new property is Rs 31.5 Lakh so STCG is Rs 31.5 Lakh - Rs 3.43 Lakh which is Rs 28.07 Lakh.
You have to pay taxes on this STCG at applicable slab rate.
2 - If the tax liability is more than Rs 10,000 you have to pay advance tax now itself, else you have to pay penalty + tax liability when filing your Income tax return. Kindly take help of a CA.
greetings mr.reddy,
i contacted a local ca here his views differ very much from above as under
1) he says pay 20.6% tax on.ltcg of first propery i.e 23.24*20.6
2) as for stcg 31.5 - 300123(total cost of acq of new house, not 26.67 in above example=149877 which is not taxabke since below exempt limit as i habe ni income as of now.
in a nutshell he has not clubber old house and new house txn togegher.
isnit appropriate?
Ok sir now I got the calculations now BUT BUt still not sure whether to also deduct clubhouse charges , advance maintainence, , , development chgs vat and service tax as mentioned above from purchase value of new flat 31.5 lacs
Also I am yet to receive sales proceeds from buyers bank, expecting the same within 10 days , so when do I pay advance tax and can I deposit amount in PPF , claim deduction while paying this tax.
Dear Dheer ..I believe that expenses like maintenance charges can not be deducted.
Tax deductions like PPF can be claimed when you file your ITR.
Thanx a lot sir for help
Hi again i omitted to mention the LTCG in ITR filed next year. What is the remedy now . Also now that LTCG is revoked and I am paying advance tax shortly it do I have to mention it now?
Dear Dheer ..Kindly consult a CA and take help.
Sir,
plz suggest. my father built a house in the year 1992-93 ,costing abought 1000000. Now if he sell this house for 7000000. the capital gane= 7000000-(1000000*1125/223)=7000000-5044843=1955157.
I thought that he can go for bond of rs 1955157 and remaing rs he can gifted to me..and i can bought a new flat.
but my adviser said he cannot gift the amount to me, my father have to purchase a new house in his name and the remaining amount( 7000000-New flat price)he can go for bond,
or he can give tax 20% on 1955157 and remaining he can give to me.
Is it sir?
Dear Mr mukherjee,
I believe that he can gift the amount to you and this amount is tax-free.
Read: Gifts & income tax implications.