Ltcg tax
6 months ago
My dad is going to purchase a second house (36 lakhs) in kerala with his savings. After that he is going to sell our first house in Maharashtra (asking price 40 lakhs), which he built in 2003. At that time it cost him around 3 to 4 lakhs. Will tax be deducted on sale?
How to save this tax?
A.Dear Client,
In India, when you sell a property, you may be subject to capital gains tax. The tax liability depends on several factors, including the holding period of the property, its sale price, and the cost of acquisition. If your father has owned the Maharashtra property for more than two years, the gains from the sale will be classified as long-term capital gains (LTCG). If the property is sold within two years of acquisition, it will be considered short-term capital gains (STCG). For LTCG, your father can claim indexation benefits. This means that the cost of acquisition (adjusted for inflation) will be considered higher, reducing the taxable capital gains. STCG is typically taxed at your regular income tax slab rate. Under Section 54 of the Income Tax Act, if the LTCG is from the sale of a residential property, your father can reinvest the proceeds in another residential property within one year before or two years after the date of transfer of old house or should construct another house within a period of three years from the date of transfer to claim an exemption. Under Section 54F, if the LTCG is not from a residential property, your father can reinvest the proceeds in another residential property to claim an exemption. If your father is unable to reinvest the proceeds immediately, he can deposit the amount in a Capital Gains Account Scheme (CGAS) with a bank. This allows him to claim the exemption at a later date when he purchases a new property.
In India, when you sell a property, you may be subject to capital gains tax. The tax liability depends on several factors, including the holding period of the property, its sale price, and the cost of acquisition. If your father has owned the Maharashtra property for more than two years, the gains from the sale will be classified as long-term capital gains (LTCG). If the property is sold within two years of acquisition, it will be considered short-term capital gains (STCG). For LTCG, your father can claim indexation benefits. This means that the cost of acquisition (adjusted for inflation) will be considered higher, reducing the taxable capital gains. STCG is typically taxed at your regular income tax slab rate. Under Section 54 of the Income Tax Act, if the LTCG is from the sale of a residential property, your father can reinvest the proceeds in another residential property within one year before or two years after the date of transfer of old house or should construct another house within a period of three years from the date of transfer to claim an exemption. Under Section 54F, if the LTCG is not from a residential property, your father can reinvest the proceeds in another residential property to claim an exemption. If your father is unable to reinvest the proceeds immediately, he can deposit the amount in a Capital Gains Account Scheme (CGAS) with a bank. This allows him to claim the exemption at a later date when he purchases a new property.
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