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1. INTRODUCTION

In India whenever someone requires money he either sells his property, shares or gold. Property is considered as capital asset under income tax law and its sale has wide range of tax implications. Govt. has imposed many restrictions on sale of property and has also allowed deductions and exemptions that can be claimed when someone sells his property. Some of the Considerations to be kept in mind while selling property are explained in this article.

Income Tax on sale of property

2. NOT EVERY PROPERTY WHICH IS SOLD IS TAXABLE-

Firstly, we should ascertain that the property which is intended to be sold should be capital asset in eyes of law. Capital asset means property of any kind held by a person but it excludes stock, rural agricultural land, Gold bonds, movable personal goods like cars, mobile, clothes, furniture, etc. Jewellery, paintings, drawings are capital asset. On sale of capital asset capital gains arises and tax is levied on such capital gain. Tax rate on sale of immovable property is as follows-

Period of Holding Type of Gain Tax Rate
Less than 2 years Short Term Capital Gain Applicable Slab rate
2 years or more Long term Capital Gain 20%

3. ACCEPT CASH ON SALE OF PROPERTY

There is restriction on taking cash on sale of immovable property. If any person takes cash of Rs. 20,000/- or more on sale of immovable property as an advance or as sale consideration, then penalty equal to cash accepted on sale shall be levied.

4. SALE OF IMMOVABLE PROPERTY FOR Rs.30 LAKHS OR MORE-

If any person purchases or sells immovable property whose Stamp Duty Value is Rs.30 lakhs or more, then it will be considered as High Value Transaction and Registrar is required to report to Income-tax Department about such transaction. The same is shown in Form No. 26AS of taxpayer. Income-tax then verifies return of income that whether adequate capital gains have been disclosed or not in ITR.

5. DEDUCTION OF TDS @1% ON SALE OF IMMOVABLE PROPERTY FOR Rs.50 LAKHS OR MORE-

If any person sells immovable property for Rs.50 lakhs or more, then he will receive sale consideration after deduction of TDS@1%. As per law buyer is required deduct TDS and then pay the balance amount of seller. The seller can claim TDS while filing his return of income. TDS is not deducted on sale of agricultural land.

6. STAMP DUTY VALUE OF PROPERTY-

Stamp duty value (SDV) is the value which is ascertained by Stamp Valuation Authority for payment of Stamp Duty. It is also called Circle Rate of property. As per income-tax law, Sale consideration is taken as follows-

If Agreed amount= SDV Sale Consideration=SDV/Agreed Amount
If Agreed amount> SDV Sale consideration= Agreed Amount
If Agreed Amount<SDV Sale Consideration= SDV

But in such case person can challenge the SDV of property.

7. IF DATE OF AGREEMENT AND REGISTRY ARE DIFFERENT-

In case of immovable property, if date of Agreement fixing the value of consideration and date of Registry are different than full value of consideration for transfer of such asset shall be the Stamp Duty Value on the date of Agreement provided amount of consideration or part thereof has been received through banking channel.

8. CAN CLAIM CAPITAL GAIN EXEMPTION BY INVESTING IN TWO HOUSES-

Taxpayers can now obtain long-term capital gains exemption on sale of a house by investing in two houses where capital gains is less than 2 Crore rupees. Earlier, the exemption was available for investment in only one property.

9. STRONG TAX PLANNING-

Taxpayer can save tax on capital gain by further investing the amount as per law. Some of capital gains exemptions allowed are as follows-

1. If capital gain on sale of residential house is further invested on purchase or construction of another residential house.

2. If net consideration on sale of long term capital asset other than residential house is invested on purchase or construction of residential house.

3. If capital gains is invested in bonds issued by National Highways Authority of India or Rural Electrification Corporation Limited.

OUR COMMENTS

Sale of property has wide range of tax implications. There is tax regulation on each and every stage of selling property. One should always seek advice of expert before selling property so that tax planning can be executed properly within required time frame. Most of the cases pending in appeal or for which notices are issued by Income-tax Dept.  for assessment relates to sale of property. Therefore adequate tax measures are required to be taken. Govt has imposed many restrictions to safeguard inflow of tax into its pocket. Tax payer should also grab an opportunity to save taxes legally.

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Disclaimer: The above comments do not constitute professional advice. The Author can be reached at companyfinancialtree@gmail.com or visit website www.financialtreecompany.com . My name is CA Divya Agrawal and I am Practising Chartered Accountant, CEO and Founder of FINANCIAL TREE COMPANY (An online return filing and Tax Consultancy Company) where we have taken an initiative that allows person to Pay from Heart. We also upload educational videos in You tube and name of our channel is FINANCIAL TREE COMPANY. Our aim is to help people in improving their financial health by spreading knowledge and love. Stay Financially Fit and Healthy.

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FINANCIAL TREE COMPANY PROVIDES BEST POSSIBLE TAX SOLUTIONS AT REASONABLE RESOURCES AND TIME TO MEET CLIENT SATISFACTION AND NEED. website-www.financialtreecompany.com Contact No. 9111872247 Email ID- companyfinancialtree@gmail.com (AN ONLINE RETURN FILING AND TAX CONSULTANCY COMPANY) View Full Profile

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28 Comments

  1. L V Naagarajan says:

    I am a senior citizen (75). In December 2023, I sold a property with an LTCG. When Am I supposed to pay the tax on LTCG? IS the section 234 B and C will be applicable for my case also even though I am normally exempt from paying any Advance tax?

  2. Hitesh says:

    I have residential property in jointly name of my mother, my wife & in my name.
    Can I Sale the property and collect money in my & my wife’s name.
    And purchase new property in my wife & my name

  3. BISWA BIJAY PAUL says:

    Dear Sir
    A house property in a subdivision town of West Bengal
    build by my Late father having 3 shares. The property built in 1950s being sold shortly jointly by all 3 share holders at a value of Rs 1500000. I am 79 years old and filing IT returns even though no Taxable Income. How it will be treated for my tax implication for 5 lacs my share> Kindly help

  4. RAJKUMAR KOTHARI says:

    Sir we made a agreement to sale the property before March 2022 @72000000 but on 1 st April 2022 circle rate increased to 8800000 also we had put up the documents to registrar on 29 March what we now do

  5. Mangesh Gadgil says:

    I had invested in a flat in Palghar in 2017 when it was under construction and now I have received possession of it. Now I want to sell it and repay the loan that I had taken for purchasing the said property. Will the sale proceeds still be calculated under capital gain tax even when the entire amount received from sale will be paid towards repayment of loan?? And if it is covered under capital gain tax, what will be the rate applied for tax??

  6. Raghav says:

    Hello Sir/Madam- Can you help clarify this 30 Lakh limit is applicable for each transaction or total in Financial Year. (Eg. If two properties are sold with 12 Lakh, 25 Lakh respectively, Will it be considered high value transaction and reported?)

  7. Milind Manohar Deshpande says:

    My 16 year old flat, actually getting sold for 13 lac but buyer making agreement for 16 lac. What will be my tax liability in that case

  8. Panduranga s prabhu says:

    Hello sir/madam,
    Recently we brought a land and constructed a house in the name of my mother.
    Now we are planned to sell this property.
    Does this comes under short term capital gains.?
    My mother she is 62 year old and she is not earning.
    So does tax is applicable? If then, till how much capital gains it is applicable and after that how much tax percent we need to pay.

  9. Madhumitha says:

    My grandfather had obtained a property by will. He passed away in 2016 leaving behind 5 legal heirs including my father. Now 2 of the legal heirs wants to release their share 2/5th shares in toto in favour of my father by way of a ‘release deed without consideration’. My father intends to sell his 3/5th share immediately. The capital gain that my father will now make will be a short term or long term capital gain? Please clarify this. Thanks in advance.

  10. Mohideen says:

    We have one house.That house has 6 shares.Now we want to register that to any one person for sale.That house value is 6 lakes.How much tax need to pay.
    If register to 3 person,how much tax need to pay.

  11. Rohit Kalpalliwar says:

    My father has old his flat and will be getting cheque of 45 lakhs soon in his name. He wants to give me the amount as gift towards a new flat which I have bought and currently paying EMI. I am an NRI and flat bought is in mumbai. The 45 lakh will help in reducing my EMI. How can my father do gift aid without getting much tax implications.
    Any help/advice is highly appreciated.

    Thanks
    Rohit K

    1. Divya Agrawal says:

      Dear Sir,
      Your father can invest capital gains on sale of flat in purchasing another house which you are buying in mumbai. The exemption will not be charged to tax if your father purchases in your name as well. For any further queries plz call 9111872247 or mail us on companyfinancialtree@gmail.com

  12. Breethi Yelstina says:

    Hello sir,
    My name is Breethi.I have sold land and received amount for Rs.3120000 on Feb 15.I am going to purchase other land on April 15.Does I need to file IT?

  13. Sumant says:

    Hello
    I have paid a token money for the purchase of property in March 2012.
    Rest money was paid between 2012 – 2019.
    Registry of property was done in Oct 2019.
    I want to sale this property in March-April 2021.
    Will it be short term or long term ??

  14. Sumant says:

    Hello
    I have paid a token money for the purchase of property in March 2012.
    Rest money was paid between 2012 – 2019.
    Registry of property was done in Oct 2019.
    I want to sale this property in March-April 2021.

  15. sumant says:

    Hello
    I have paid a token money for the purchase of property in March 2012.
    Rest money was paid between 2012 – 2019.
    Registry of property was done in Oct 2019.
    I want to sale this property in March-April 2021.
    Will it be classified as short term or long term ??

  16. Sumant says:

    Hello
    I have paid a token money for the purchase of property in March 2012.
    Rest amount was paid between 2012 & 2019.
    Registry was done in Oct 2019.
    I want to sale this property say in March-April 2021
    Will it be considered long term or short term.

  17. ashok talwar says:

    Dear Ms. Aggarwal, In my case the company has refunded the money paid to them (in installments at various levels) for the non-delivery of a retail unit due to some reasons. Also paid some compensation thereon. Would like to know what are the tax implications. thanks

  18. G RAMACHANDRAN says:

    Sir

    I sold my flat for Rs 24 lacs in Dec 2020.
    I understand that it will not be reflected in 26AS.
    Pl guide whether I have to compute and pay capital gains tax on this transaction

  19. Nitin says:

    Hi Sir, I have sold my flat at 62.5 L and paid TDS of 48k. I have form 26AS for the same. Is it sufficient while filling ITR or an other document is required?

    1. santosh wgh says:

      dear sir,
      we have flat on ghodepdev and we want to sell this is the name of my father in low and we have dell 56.50 lakh this is form mhada proerty what will have pay tax on this proerty

  20. MAHESH K MOHITE says:

    Dear Sir,

    I Am in process of selling my Mumbai flat at 48 lacs. I had received a token of 18 Lacs, rest on registration. I bought this property from other person in 1995 . Said property was in slum area. The said property was demolished & redeveloped by Slum & Rehabilitation Authority . I got the possession in 2007 after redevelopment. The property was having restrictions to sale for 10yrs, but now the property is saleable as per the Authority. I want to know how much will be the long term capital gain tax & is there any way to get exemption from the tax.

    Regards,
    Mahesh Mohite

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