Tax on LTCG on House Sale
8 months ago
I own a House and I co-own another House with my spouse. I also own an Open Plot. If I sell my house ( exclusively owned by me) and Plot and purchase another house with coownership with my son and Daughter-in -Law within 3 years from selling, am I eligible for tax exemption on LTCG.
A.Dear Client,
Exemption under section 54 of the IT Act, 1961 can be claimed in respect of capital gains arising on the transfer of a capital asset, being long-term residential house property. To claim an exemption under section 54, another house should be purchased (a) within a period of one year before or two years after the date of transfer of house or (b) constructs one residential house within three years after the date of transfer. If the new property is sold within a period of 3 years from the date of its acquisition, then, for the purpose of computing the capital gains on this transfer, the cost of acquisition of this house property shall be reduced by the amount of capital gain exempt under section 54 earlier. A taxpayer who sells multiple properties and invests all proceeds into one house can claim an exemption under section 54F, provided (a) If the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) Provided that nothing contained in this sub-section shall apply where the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset. In short, while Section 54 deals with exemption from capital gain arising from the sale of residential house property, Section 54F deals with exemption from capital gain on the transfer of other Capital Assets if the investment is made in property for residential use provided that an assessee does not ‘own’ more than one residential house on the date of transfer (as per proviso (a)(i) to section 54F (1)). No such condition exists under Section 54 of the Act. So, for claiming exemption against LTCG under Section 54 – the no. of houses already owned by the person is immaterial. He can still claim exemption by reinvesting the Capital Gains on the Sale of the House/property in another Residential House. For further clarification, it is better to consult the matter with a CA or Tax Consultant.
Exemption under section 54 of the IT Act, 1961 can be claimed in respect of capital gains arising on the transfer of a capital asset, being long-term residential house property. To claim an exemption under section 54, another house should be purchased (a) within a period of one year before or two years after the date of transfer of house or (b) constructs one residential house within three years after the date of transfer. If the new property is sold within a period of 3 years from the date of its acquisition, then, for the purpose of computing the capital gains on this transfer, the cost of acquisition of this house property shall be reduced by the amount of capital gain exempt under section 54 earlier. A taxpayer who sells multiple properties and invests all proceeds into one house can claim an exemption under section 54F, provided (a) If the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) Provided that nothing contained in this sub-section shall apply where the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset. In short, while Section 54 deals with exemption from capital gain arising from the sale of residential house property, Section 54F deals with exemption from capital gain on the transfer of other Capital Assets if the investment is made in property for residential use provided that an assessee does not ‘own’ more than one residential house on the date of transfer (as per proviso (a)(i) to section 54F (1)). No such condition exists under Section 54 of the Act. So, for claiming exemption against LTCG under Section 54 – the no. of houses already owned by the person is immaterial. He can still claim exemption by reinvesting the Capital Gains on the Sale of the House/property in another Residential House. For further clarification, it is better to consult the matter with a CA or Tax Consultant.
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A.Dear client,
An individual will be exempted from paying any tax if their annual income is below a predetermined limit. The tax exemption limit is the following.
Residential Indians of 80 years of age or above will be exempted if their Annual Income is below Rs. 5,00,000.
Residential Indians between 60 to 80 years of age will be exempted from long-term capital gains tax in 2021 if they earn Rs. 3,00,000 per annum.
For individuals 60 years or younger, the exempted limit is Rs. 2,50,000 every year.
Hindu Undivided Families can enjoy tax exemption if the annual income of their family is under Rs. 2,50,000.
For non-residential Indians, the exempted limit is flat Rs. 2,50,000 irrespective of the age of the individual.
Individuals are not liable to earn any tax deduction under Section 80C to 80U from long-term capital gains tax in India.
The entire profited amount will qualify for taxable income and will be charged a flat 20% tax under long-term capital gain. There is no minimum exemption limit on the entire amount, which makes it susceptible to attract large taxes.
An individual will be exempted from paying any tax if their annual income is below a predetermined limit. The tax exemption limit is the following.
Residential Indians of 80 years of age or above will be exempted if their Annual Income is below Rs. 5,00,000.
Residential Indians between 60 to 80 years of age will be exempted from long-term capital gains tax in 2021 if they earn Rs. 3,00,000 per annum.
For individuals 60 years or younger, the exempted limit is Rs. 2,50,000 every year.
Hindu Undivided Families can enjoy tax exemption if the annual income of their family is under Rs. 2,50,000.
For non-residential Indians, the exempted limit is flat Rs. 2,50,000 irrespective of the age of the individual.
Individuals are not liable to earn any tax deduction under Section 80C to 80U from long-term capital gains tax in India.
The entire profited amount will qualify for taxable income and will be charged a flat 20% tax under long-term capital gain. There is no minimum exemption limit on the entire amount, which makes it susceptible to attract large taxes.
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